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Weathering an Unexpected Financial Shock: The Role of Cash Grants on Household Finance and Business Survival

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  • Justin Gallagher
  • Daniel Hartley
  • Shawn M. Rohlin

Abstract

We estimate the causal effect of cash grants on household finance and business survival following a natural disaster. Disaster-affected individuals in high damage blocks with access to cash grants have 17% less credit card debt following the disaster than those without access to cash grants. Grants do not reduce negative financial outcomes, but do decrease migration. The grants play a role in mitigating the effects of the shock to businesses; resulting in 18% more establishments and 29% more employees post-disaster in disaster-affected neighborhoods where residents receive grants, relative to disaster-affected neighborhoods where they do not receive grants. These effects are concentrated among small non-manufacturing establishments that rely on local demand.

Suggested Citation

  • Justin Gallagher & Daniel Hartley & Shawn M. Rohlin, 2019. "Weathering an Unexpected Financial Shock: The Role of Cash Grants on Household Finance and Business Survival," Working Paper Series WP-2019-10, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhwp:wp-2019-10
    DOI: 10.21033/wp-2019-10
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    Cited by:

    1. Alejandro del Valle & Tess C. Scharlemann & Stephen H. Shore, 2022. "Household Financial Decision-Making After Natural Disasters: Evidence from Hurricane Harvey," Finance and Economics Discussion Series 2022-015, Board of Governors of the Federal Reserve System (U.S.).

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    More about this item

    Keywords

    Natural disasters; household finances; regional economic activity;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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