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The Local Economic Impact of Natural Disasters

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  • Brigitte Roth Tran
  • Daniel J. Wilson

Abstract

We use nearly four decades of US county data to study dynamic local economic impacts of natural disasters that trigger federal aid. We find that these disasters on average raise personal income per capita in the longer run (eight years out). We also find that, in the longer run, wages and home prices are higher, while employment and population are unaffected, suggesting that the income boost may reflect productivity increases and greater demand for housing in supply-constrained areas or compositional shifts. Allowing for heterogeneity across disaster types, we find that the longer-run income boost is driven primarily by hurricanes and tornadoes. We also find that the longer-run boost increases with damages, suggestive of an important role for insurance and government aid—which are highly correlated with damages—in fueling recovery.

Suggested Citation

  • Brigitte Roth Tran & Daniel J. Wilson, 2025. "The Local Economic Impact of Natural Disasters," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 12(6), pages 1667-1704.
    • Handle: RePEc:ucp:jaerec:doi:10.1086/735533
    DOI: 10.1086/735533
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    Cited by:

    1. Bomin Jiang & Daniel Rigobon & Roberto Rigobon, 2022. "From Just-in-Time, to Just-in-Case, to Just-in-Worst-Case: Simple Models of a Global Supply Chain under Uncertain Aggregate Shocks," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 70(1), pages 141-184, March.
    2. Ruchi Avtar & Kristian S. Blickle & Rajashri Chakrabarti & Janavi Janakiraman & Maxim L. Pinkovskiy, 2023. "Understanding the Linkages between Climate Change and Inequality in the United States," Economic Policy Review, Federal Reserve Bank of New York, vol. 29(1), pages 1-39, June.
    3. Hashimoto, Ryuichiro & Sudo, Nao, 2024. "Transmission of flood damage to the real economy and financial intermediation: Simulation analysis using a DSGE model," Journal of Environmental Economics and Management, Elsevier, vol. 128(C).
    4. Kristian S. Blickle & Sarah Ngo Hamerling & Donald P. Morgan, 2021. "How Bad Are Weather Disasters for Banks?," Staff Reports 990, Federal Reserve Bank of New York.
    5. Bodenstein, Martin & Scaramucci, Mikaël, 2025. "On the GDP effects of severe physical hazards," European Economic Review, Elsevier, vol. 175(C).
    6. Edward L. Glaeser, 2021. "Urban Resilience," NBER Working Papers 29261, National Bureau of Economic Research, Inc.
    7. Kristian S. Blickle & João A. C. Santos, 2022. "Unintended Consequences of "Mandatory" Flood Insurance," Staff Reports 1012, Federal Reserve Bank of New York.
    8. Hee Soo (test record) Kim & Christian Matthes & Toan Phan, 2011. "Extreme Weather and the Macroeconomy," Working Paper 21-14, Federal Reserve Bank of Richmond.
    9. Philippe Kabore & Nicholas Rivers & Catherine Deri Armstrong, 2023. "Natural disasters and economic performance: Evidence from the Slave Lake wildfire," Working Papers 2301E Classification-D14,, University of Ottawa, Department of Economics.
    10. Jerch, Rhiannon & Kahn, Matthew E. & Lin, Gary C., 2023. "Local public finance dynamics and hurricane shocks," Journal of Urban Economics, Elsevier, vol. 134(C).
    11. Emanuele Bacchiocchi & Andrea Bastianin & Graziano Moramarco, 2024. "Macroeconomic Spillovers of Weather Shocks across U.S. States," Working Papers 2024.09, Fondazione Eni Enrico Mattei.
    12. Zhao, Yue & Brooks, Adria E. & Du, Xiaodong, 2024. "Electricity market resilience in the face of Hurricane Harvey: A network-oriented approach," Energy Economics, Elsevier, vol. 139(C).

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