9 suffered; the next 15 towns ranked below the median damage score and the remaining ones were slightly above<sup>8</sup> . This means that these towns were generally not entitled to significant compensatory financial transfers. However, all young men belonging to specific cohorts were still granted the exemption from military service<sup>9</sup> . Second, geographic proximity between neighboring towns across the border of the quake region implies that they largely shared the same economic environment. Thus, they were exposed in a similar fashion to the deep economic recession ensuing the quake. More broadly, any general equilibrium effect of the quake probably had the same impact on similar individuals across the border. This implies, in particular, that changes in schooling choices induced by changes in wages and employment opportunities are of the same magnitude and accounted for in comparisons of similar individuals across the border of the quake region.

The 1981 population census allows us to assess whether towns just outside the quake region represent the appropriate counterfactual for towns just inside the region<sup>10</sup> . In particular, census data allow us to compare educational achievements and employment rates in the two groups of towns. Unfortunately, the Italian census does not collect earnings and income data. We focus on the adult population, specifically people aged 30-50 at the census date.

Figure (3) shows the age-specific differences in the percentage of high school graduates among the adults living in inner and outer towns as of 1981 together with the associated 95 percent confidence interval. Differences are generally small and never statistically significant at customary confidence

> 8Specifically, the lowest level of the damage scale corresponds to situations in which no one was injured or died because of the quake, less than 2 percent of the population lost their home, temporary shelter was needed for no more than 5 percent of the population, less than 1 percent of residential estate was damaged and less than 0.5 percent was declared inhabitable. Analogously, the highest damage level assigned to towns outside of the epicenter corresponds to situations in which more than 10 percent of the population was injured or died, more than 20 percent lost their home, temporary shelter was required for more than 40 percent of the population and more than 30 percent of residential estate was declared damaged or inhabitable.

> 9Since the quake mostly affected two administrative regions, Campania and Basilicata, the government eventually decided to exempt all men in those regions irrespective of the actual damage suffered by their towns of residence, provided they belonged to one of the two regions.

> 10Specifically, for all our analyses we had access to the entire population census and extracted all records pertaining to the units of analysis. This allows us to avoid sampling issues related to the small size of the relevant units (town-cohort) that would arise if we used the 5% public use census sample. Because of privacy legislation, access to the universe of census records was possible only through the National Statistical Institute (Istat) safecenter, located in Rome, Italy.