Structural Estimation at the Product Level: The impact of the Kobe Earthquake

This paper studies the link between product-level dynamics and macroeconomic fluctuations using rich census data from Kobe covering the period 1992-2013. The dataset includes two major disruptions—the 1995 Kobe earthquake and the 2008 global financial crisis—and provides annual information for more than 1,000 six-digit product categories. To isolate the effects of the earthquake, we construct counterfactual cities, such as Nagoya. We estimate a multi-product firm DSGE model using maximum likelihood with a computationally robust estimation strategy. The results reveal substantial heterogeneity in product-level responses to shocks, with important implications for aggregate dynamics, the propagation of large disasters, and the role of product-specific characteristics in shaping macroeconomic resilience.