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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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  • Deryugina, Tatyana, 2011. "The Role of Transfer Payments in Mitigating Shocks: Evidence From the Impact of Hurricanes," MPRA Paper 53307, University Library of Munich, Germany, revised 08 Aug 2013.
    • Handle: RePEc:pra:mprapa:53307
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    3. Matthew Ranson & Lisa Tarquinio & Audrey Lew, 2016. "Modeling the Impact of Climate Change on Extreme Weather Losses," NCEE Working Paper Series 201602, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised May 2016.
    4. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2014. "What Do We Learn from the Weather? The New Climate-Economy Literature," Journal of Economic Literature, American Economic Association, vol. 52(3), pages 740-798, September.
    5. Kirchberger, Martina, 2017. "Natural disasters and labor markets," Journal of Development Economics, Elsevier, vol. 125(C), pages 40-58.
    6. Adriana Kocornik-Mina & Thomas K. J. McDermott & Guy Michaels & Ferdinand Rauch, 2020. "Flooded Cities," American Economic Journal: Applied Economics, American Economic Association, vol. 12(2), pages 35-66, April.
    7. Davlasheridze, Meri & Fisher-Vanden, Karen & Klaiber, H. Allen, 2013. "The Higher Order Impacts of Hurricane: Evidence from County Level Analysis," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150196, Agricultural and Applied Economics Association.
    8. Lazzaroni, Sara & van Bergeijk, Peter A.G., 2014. "Natural disasters' impact, factors of resilience and development: A meta-analysis of the macroeconomic literature," Ecological Economics, Elsevier, vol. 107(C), pages 333-346.
    9. Jianhong E. Mu & Yong Chen, 2016. "Impacts of large natural disasters on regional income," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 83(3), pages 1485-1503, September.
    10. Lynham, John & Noy, Ilan & Page, Jonathan, 2017. "The 1960 Tsunami in Hawaii: Long-Term Consequences of a Coastal Disaster," World Development, Elsevier, vol. 94(C), pages 106-118.
    11. Kousky, Carolyn, 2012. "Informing Climate Adaptation: A Review of the Economic Costs of Natural Disasters, Their Determinants, and Risk Reduction Options," RFF Working Paper Series dp-12-28, Resources for the Future.
    12. Berenger Djoumessi Tiague, 2023. "Floods, Agricultural Production, and Household Welfare: Evidence from Tanzania," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 85(2), pages 341-384, June.
    13. Tatyana Deryugina & Solomon M. Hsiang, 2014. "Does the Environment Still Matter? Daily Temperature and Income in the United States," NBER Working Papers 20750, National Bureau of Economic Research, Inc.
    14. Meri Davlasheridze & Qin Fan, 2017. "Household Adjustments to Hurricane Katrina," The Review of Regional Studies, Southern Regional Science Association, vol. 47(1), pages 92-112, Winter.
    15. Justin Gallagher & Daniel Hartley, 2017. "Household Finance after a Natural Disaster: The Case of Hurricane Katrina," American Economic Journal: Economic Policy, American Economic Association, vol. 9(3), pages 199-228, August.
    16. Martina Kirchberger, 2014. "Natural Disasters and Labour Markets," Economics Series Working Papers WPS/2014-19, University of Oxford, Department of Economics.
    17. Henry He Huang & Joseph Kerstein & Chong Wang, 2018. "The impact of climate risk on firm performance and financing choices: An international comparison," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(5), pages 633-656, July.
    18. Song, Yanwu & Wang, Can & Wang, Zhaohua, 2023. "Climate risk, institutional quality, and total factor productivity," Technological Forecasting and Social Change, Elsevier, vol. 189(C).
    19. Qing Miao & Yilin Hou & Michael Abrigo, 2018. "Measuring the Financial Shocks of Natural Disasters: A Panel Study of U.S. States," National Tax Journal, National Tax Association;National Tax Journal, vol. 71(1), pages 11-44, March.
    20. Kousky, Carolyn, 2014. "Informing climate adaptation: A review of the economic costs of natural disasters," Energy Economics, Elsevier, vol. 46(C), pages 576-592.
    21. Laura A. Bakkensen & Robert O. Mendelsohn, 2016. "Risk and Adaptation: Evidence from Global Hurricane Damages and Fatalities," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(3), pages 555-587.
    22. Chin-Hsien Yu & Jianhong E. Mu & Jinxiu Ding & Bruce A. McCarl, 2017. "Relationships between typhoons, climate and crime rates in Taiwan," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 89(2), pages 871-897, November.
    23. Zhou, Ziqiao & Zhang, Lin, 2021. "Destructive destruction or creative destruction? Unraveling the effects of tropical cyclones on economic growth," Economic Analysis and Policy, Elsevier, vol. 70(C), pages 380-393.
    24. Andrea Barigazzi & Giovanni Gallo, 2023. "How Pandemic Shock Affects Claim for Minimum Income Measures," Center for the Analysis of Public Policies (CAPP) 0185, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".

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    More about this item

    Keywords

    Mitigation; Macroeconomic Shock; Transfer Payments;
    All these keywords.

    JEL classification:

    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H8 - Public Economics - - Miscellaneous Issues
    • H84 - Public Economics - - Miscellaneous Issues - - - Disaster Aid
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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