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Measuring the Financial Shocks of Natural Disasters: A Panel Study of U.S. States

Author

Listed:
  • Qing Miao
  • Yilin Hou
  • Michael Abrigo

Abstract

This paper employs panel vector autoregression to examine the dynamic fiscal response to natural disasters. With 50-state, 1970‐2013 panel data on state government finance and disaster damage, we estimate disaster impacts on revenue, expenditure, debt issuance, and federal-state transfers. We find that following a disaster, states increase program expenditure and receive more federal transfers. Disasters have limited impact on total tax revenues but amplify fluctuations in sales, income, and property tax revenues. Our findings suggest that disaster-induced additional spending is largely financed through federal transfers, which include not only disaster relief funds but also non-disaster-related public welfare assistance.

Suggested Citation

  • 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.
    • Handle: RePEc:ntj:journl:v:71:y:2018:i:1:p:11-44
    DOI: 10.17310/ntj.2018.1.01
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    Cited by:

    1. Chrysanthakopoulos, Christos & Tagkalakis, Athanasios, 2026. "Natural disasters and the effects of reconstruction expenditure on output," Economic Modelling, Elsevier, vol. 156(C).
    2. Claudia V Diezmartínez & Anne G Short Gianotti, 2025. "Climate change and municipal finance: Ordinary innovations for just urban transitions," Urban Studies, Urban Studies Journal Limited, vol. 62(7), pages 1375-1396, May.
    3. Kucuk, Merve & Ulubasoglu, Mehmet, 2024. "Paying income tax after a natural disaster," Journal of Environmental Economics and Management, Elsevier, vol. 128(C).
    4. Meri Davlasheridze & Qing Miao, 2021. "Does post-disaster aid promote community resilience? Evidence from federal disaster programs," 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. 109(1), pages 63-88, October.
    5. Lint Barrage, 2024. "Climate Change Impacts on Public Finances Around the World," CESifo Working Paper Series 11443, CESifo.
    6. Carla Morvan, 2022. "Municipalities' budgetary response to natural disasters," Working Papers 2206, Groupe d'Analyse et de Théorie Economique Lyon St-Etienne (GATE Lyon St-Etienne), Université de Lyon.
    7. Bo Zhao, 2022. "The Impact of Weather on Local Government Spending," Working Papers 22-22, Federal Reserve Bank of Boston.
    8. Sungyoon Lee & Jennifer Dodge & Gang Chen, 2022. "The cost of social vulnerability: an integrative conceptual framework and model for assessing financial risks in natural disaster management," 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. 114(1), pages 691-712, October.
    9. Meri Davlasheridze & Qing Miao, 2021. "Natural disasters, public housing, and the role of disaster aid," Journal of Regional Science, Wiley Blackwell, vol. 61(5), pages 1113-1135, November.
    10. Lodi, Chiara & Marin, Giovanni & Modica, Marco, "undated". "Fiscal policy response of local governments to floods in Italy," FEEM Working Papers 329435, Fondazione Eni Enrico Mattei (FEEM).
    11. Omer Bayar & Christopher Boudreaux & Todd Richard Yarbrough, 2025. "Natural disasters and economic dynamism: Evidence from U.S. entrepreneurial activity," Contemporary Economic Policy, Western Economic Association International, vol. 43(3), pages 470-494, July.
    12. Preeya Mohan & Eric Strobl, 2021. "The impact of tropical storms on tax revenue," Journal of International Development, John Wiley & Sons, Ltd., vol. 33(3), pages 472-489, April.

    More about this item

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs

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