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The Role of Transfer Payments in Mitigating Shocks: Evidence From the Impact of Hurricanes

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  • Deryugina, Tatyana

Abstract

Little is known about how aggregate economic shocks are mitigated by social safety nets. I use hurricanes as an exogenous shock to the economics of US counties and show that non-disaster government transfers, such as unemployment insurance and public medical spending, increase substantially in the decade after landfall. Indeed, I estimate that the net present value of the increase in non-disaster transfers is more than double that of direct disaster aid. Among the implications of these findings are that the fiscal costs of natural disasters are much larger than previously thought and that existing social safety net programs help to mitigate the effects of macroeconomic shocks.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 53307.

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Date of creation: May 2011
Date of revision: 08 Aug 2013
Handle: RePEc:pra:mprapa:53307

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Keywords: Mitigation; Macroeconomic Shock; Transfer Payments;

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References

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  1. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, Econometric Society, vol. 62(3), pages 539-91, May.
  2. Anthony Murphy & Eric Strobl, 2010. "The impact of hurricanes on housing prices: evidence from U.S. coastal cities," Working Papers 1009, Federal Reserve Bank of Dallas.
  3. Baily, Martin Neil, 1978. "Some aspects of optimal unemployment insurance," Journal of Public Economics, Elsevier, vol. 10(3), pages 379-402, December.
  4. Hilary W. Hoynes & Diane Schanzenbach, 2007. "Consumption Responses to In-Kind Transfers: Evidence from the Introduction of the Food Stamp Program," NBER Working Papers 13025, National Bureau of Economic Research, Inc.
  5. Howard C. Kunreuther & Erwann O. Michel-Kerjan, 2007. "Climate Change, Insurability of Large-scale Disasters and the Emerging Liability Challenge," NBER Working Papers 12821, National Bureau of Economic Research, Inc.
  6. Daron Acemoglu & David H. Autor & David Lyle, 2004. "Women, War, and Wages: The Effect of Female Labor Supply on the Wage Structure at Midcentury," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 112(3), pages 497-551, June.
  7. Andrea Leiter & Harald Oberhofer & Paul Raschky, 2009. "Creative Disasters? Flooding Effects on Capital, Labour and Productivity Within European Firms," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 43(3), pages 333-350, July.
  8. David H. Autor & David Dorn & Gordon H. Hanson, 2013. "The China Syndrome: Local Labor Market Effects of Import Competition in the United States," American Economic Review, American Economic Association, vol. 103(6), pages 2121-68, October.
  9. Chetty, Raj, 2006. "A general formula for the optimal level of social insurance," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 1879-1901, November.
  10. Eric Strobl, 2011. "The Economic Growth Impact of Hurricanes: Evidence from U.S. Coastal Counties," The Review of Economics and Statistics, MIT Press, vol. 93(2), pages 575-589, May.
  11. Conley, T. G., 1999. "GMM estimation with cross sectional dependence," Journal of Econometrics, Elsevier, vol. 92(1), pages 1-45, September.
  12. Eric Strobl & Frank Walsh, 2009. "The Re-Building Effect of Hurricanes: Evidence from Employment in the US Construction Industry," Working Papers hal-00393886, HAL.
  13. Patricia Cortes, 2008. "The Effect of Low-Skilled Immigration on U.S. Prices: Evidence from CPI Data," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 116(3), pages 381-422, 06.
  14. Martin Feldstein, 1995. "Tax Avoidance and the Deadweight Loss of the Income Tax," NBER Working Papers 5055, National Bureau of Economic Research, Inc.
  15. Belasen, Ariel R. & Polachek, Solomon, 2008. "How Hurricanes Affect Employment and Wages in Local Labor Markets," IZA Discussion Papers 3407, Institute for the Study of Labor (IZA).
  16. Chetty, Raj & Looney, Adam, 2006. "Consumption smoothing and the welfare consequences of social insurance in developing economies," Journal of Public Economics, Elsevier, vol. 90(12), pages 2351-2356, December.
  17. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
  18. Ballard, Charles L & Shoven, John B & Whalley, John, 1985. "General Equilibrium Computations of the Marginal Welfare Costs of Taxes in the United States," American Economic Review, American Economic Association, vol. 75(1), pages 128-38, March.
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Citations

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Cited by:
  1. Davlasheridze, Meri & Fisher-Vanden, Karen & Klaiber, Allen H., 2013. "The Higher Order Impacts of Hurricane: Evidence from County Level Analysis," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C., Agricultural and Applied Economics Association 150196, Agricultural and Applied Economics Association.
  2. Martina Kirchberger, 2014. "Natural disasters and labour markets," CSAE Working Paper Series 2014-19, Centre for the Study of African Economies, University of Oxford.
  3. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2013. "What Do We Learn from the Weather? The New Climate-Economy Literature," NBER Working Papers 19578, National Bureau of Economic Research, Inc.
  4. Kousky, Carolyn, 2012. "Informing Climate Adaptation: A Review of the Economic Costs of Natural Disasters, Their Determinants, and Risk Reduction Options," Discussion Papers, Resources For the Future dp-12-28, Resources For the Future.
  5. Lynham, J & Noy, I & Page, J, 2012. "The 1960 Tsunami in Hawaii: Long Term Consequences of a Coastal Disaster," Working Paper Series 2389, Victoria University of Wellington, School of Economics and Finance.

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