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How Disasters Affect Local Labor Markets: The Effects of Hurricanes in Florida

Author

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  • Belasen, Ariel R.

    () (Southern Illinois University Edwardsville)

  • Polachek, Solomon

    () (Binghamton University, New York)

Abstract

Exogenous shocks often impact a local labor market more than at the national level. This study improves upon the standard Difference in Difference (DD) approach by examining exogenous shocks using a Generalized Difference in Difference (GDD) econometric approach that identifies the effects of shocks resulting from hurricanes. Based on the Quarterly Census of Employment and Wages (QCEW) data on earnings and employment, the earnings of an average worker in Florida will increase as much as four percent within the first quarter of being hit directly by a hurricane, whereas the effects of a hurricane occurring in a neighboring county move earnings per worker in the opposite direction by roughly the same percentage. As time goes by, workers in both sets of counties will experience faster growth in their earnings than workers in completely unaffected counties; however, this is coupled with a slower growth rate in employment. Powerful hurricanes have greater effects than their weaker counterparts. Additionally, the shifts in earnings and employment can be traced back, in part, to geographic features of the counties, namely that the coastal and Panhandle counties exhibit greater effects than landlocked counties. Although focus is on hurricanes in Florida, this GDD technique is applicable to a wider range of exogenous shocks.

Suggested Citation

  • Belasen, Ariel R. & Polachek, Solomon, 2007. "How Disasters Affect Local Labor Markets: The Effects of Hurricanes in Florida," IZA Discussion Papers 2976, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp2976
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    References listed on IDEAS

    as
    1. Ariel R. Belasen & Solomon W. Polachek, 2008. "How Hurricanes Affect Wages and Employment in Local Labor Markets," American Economic Review, American Economic Association, pages 49-53.
    2. Paulo Guimaraes & Frank L. Hefner & Douglas P. Woodward, 1993. "Wealth And Income Effects Of Natural Disasters: An Econometric Analysis Of Hurricane Hugo," The Review of Regional Studies, Southern Regional Science Association, vol. 23(2), pages 97-114, Fall.
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    5. Lucas, Robert E, Jr & Rapping, Leonard A, 1969. "Price Expectations and the Phillips Curve," American Economic Review, American Economic Association, pages 342-350.
    6. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 249-275.
    7. מחקר - ביטוח לאומי, 2006. "Annual Survey 2005," Working Papers 15, National Insurance Institute of Israel.
    8. Mark Skidmore & Hideki Toya, 2002. "Do Natural Disasters Promote Long-Run Growth?," Economic Inquiry, Western Economic Association International, vol. 40(4), pages 664-687, October.
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    More about this item

    Keywords

    earnings; exogenous shock; difference-in-difference estimation; local labor markets; employment; hurricanes;

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J49 - Labor and Demographic Economics - - Particular Labor Markets - - - Other
    • 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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