Social capital is thought to have both positive and negative aspects. This paper examines how social capital has worked in the process of recovery and reconstruction in Kobe since the Great Hanshin Awaji Earthquake. The paper focuses on the tertiary sector of Kobe because since the earthquake there has been a structural shift from the secondary sector due to the damage caused by the earthquake, and because the sector accounted for 80% of employment, the most important factor for reconstruction in the mid- and long-term. The paper proves that both bonding and bridging social capital are important factors for employment. This finding provides empirical evidence for the on-going debate on how to rebuild Tohoku.
Keywords: Social capital, SMEs (Small Medium Enterprises), Natural disasters, Panel data analysis, Kobe