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Financial Vulnerability and Personal Finance Outcomes of Natural Disasters

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  • Kelly D. Edmiston

Abstract

I evaluate the effects of hurricanes of varying intensity on the financial condition of a typical resident in both affected and unaffected census tracts, where the degree of affect is determined by the relative location of a census tract?s boundary with buffers around the tracks of hurricane eyes that occurred in the years 2000-2014. The primary question in the article is whether financial vulnerability, or, alternatively, ?financial preparedness,? affects post-hurricane disaster financial outcomes. {{p}} I find that hurricanes tend to lower credit scores, for the most, but outcomes are far from uniform across categories of hurricanes. I attribute these differences largely to number of disasters in each quarter of the study period, levels of disaster aid, and media coverage and political interest. In some cases I surmise that those in the 25-mile buffer may benefit from economic stimulus that follows a hurricane, but do not have damages and other economic losses to the same extent as those within a 15-mile buffer. Modeling hurricanes as ?treatments? and interacting them with variables from consumer credit reports, I find that the financial vulnerability of residents in affected census tracts is associated with poorer financial outcomes. Considering lags, financial vulnerability is shown to have a considerable impact on post-hurricane personal finance outcomes.

Suggested Citation

  • Kelly D. Edmiston, 2017. "Financial Vulnerability and Personal Finance Outcomes of Natural Disasters," Research Working Paper RWP 17-9, Federal Reserve Bank of Kansas City, revised 01 Sep 2017.
  • Handle: RePEc:fip:fedkrw:rwp17-09
    DOI: 10.18651/RWP2017-09
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    File URL: https://doi.org/10.18651/RWP2017-09
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    More about this item

    Keywords

    Hurricanes; Disasters; Financial Preparedness;

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • 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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