The economic impacts of direct natural disaster exposure

We estimate the economic impacts of having your home damaged or destroyed by a natural disaster. Regressions with individual, area and time fixed-effects, indicate that experiencing a natural disaster has no impact on employment and income, but substantial impacts on financial hardship and risk aversion. Impacts are particularly large for smaller isolated disasters, which attract little government support. Conversely, impacts of residing in a disaster zone without experiencing residential destruction are small. Using a Group Fixed Effects estimator, we find predictors of financial vulnerability to destruction include age, parenthood, illness, and social support. These results can help improve the allocation of government assistance after future disasters.(c) 2022 Elsevier B.V. All rights reserved.

Automated summary

This study estimates the economic impacts of natural disasters on household damages or destruction. The findings show that natural disasters have no impact on employment and income, but have substantial effects on financial hardship and risk aversion. Smaller isolated disasters, which receive little government support, have particularly large impacts, while residing in a disaster zone without experiencing residential destruction has minimal effects. Age, parenthood, illness, and social support are identified as predictors of financial vulnerability to destruction. These results can inform the allocation of government assistance after future disasters.