Seeking a Better Recovery Process from Major Natural Disasters: A Lesson from Several Growth Models with Multiple Equilibria

Abstract

Based on several existing growth models with multiple steady states, this paper examines economic conditions that enable recovery from major natural disasters. We focus on recovery from the 2011 Great East Japan Earthquake and Tsunami. More concretely, we survey three recently released studies, which indicate that the sense of direction for expectation formation has the potential to play an important role in recovering from large natural disasters. We also find an inference that the big-push development scenarios that traditionally appear in developing economies have a low affinity with disaster reconstruction in developed countries. After a discussion of these equilibrium selections, this paper makes further reference to economic environments needed for a sustainable recovery path toward a superior long-run, steady-state equilibrium. This equilibrium allows interpreting the terminal of a series of recovery programs in our context.