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Taken by Storm: Business Financing, Survival, and Contagion in the Aftermath of Hurricane Katrina

We use hurricane Katrina's damage to the Mississippi coast in 2005 as a natural experiment to study business survival in the aftermath of a capital-destruction shock. We find very high exit rates for businesses that incurred physical damage, particularly for small firms and less-productive establishments. Auxiliary evidence from the Survey of Business Owners suggests that the differential size effect is tied to the presence of financial constraints. In the long run, the cumulative effect of the storm was even larger, compounded by local demand externalities due to the proximity of surviving businesses to damaged businesses that had exited. These forces explain why the most heavily damaged coastal areas of Mississippi had not recovered within five years despite significant help from both federal and state sources.

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File URL: http://economics.missouri.edu/working-papers/2014/WP1406_basker.pdf
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Paper provided by Department of Economics, University of Missouri in its series Working Papers with number 1406.

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Length: 45 pgs.
Date of creation: 31 Mar 2014
Date of revision: 23 Oct 2014
Handle: RePEc:umc:wpaper:1406
Contact details of provider: Postal: 118 Professional Building, Columbia, MO 65211
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Fax: (573) 882-2697
Web page: http://economics.missouri.edu/

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  1. Emek Basker, 2007. "When Good Instruments Go Bad," Working Papers 0706, Department of Economics, University of Missouri.
  2. Teresa C Fort & John Haltiwanger & Ron S Jarmin & Javier Miranda, 2013. "How Firms Respond to Business Cycles: The Role of Firm Age and Firm Size," IMF Economic Review, Palgrave Macmillan, vol. 61(3), pages 520-559, August.
  3. Andrea Leiter & Harald Oberhofer & Paul Raschky, 2009. "Creative Disasters? Flooding Effects on Capital, Labour and Productivity Within European Firms," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 43(3), pages 333-350, July.
  4. Mark Doms & Ron Jarmin & Shawn Klimek, 2004. "Information technology investment and firm performance in US retail trade," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 13(7), pages 595-613.
  5. Emek Basker & Michael Noel, 2009. "The Evolving Food Chain: Competitive Effects of Wal-Mart's Entry into the Supermarket Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(4), pages 977-1009, December.
  6. Ariel R. Belasen & Solomon W. Polachek, 2009. "How Disasters Affect Local Labor Markets: The Effects of Hurricanes in Florida," Journal of Human Resources, University of Wisconsin Press, vol. 44(1).
  7. Doms, Mark & Dunne, Timothy & Roberts, Mark J., 1995. "The role of technology use in the survival and growth of manufacturing plants," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 523-542, December.
  8. Rachel Croson & Uri Gneezy, 2009. "Gender Differences in Preferences," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 448-74, June.
  9. Susan Coleman & Alicia Robb, 2009. "A comparison of new firm financing by gender: evidence from the Kauffman Firm Survey data," Small Business Economics, Springer, vol. 33(4), pages 397-411, December.
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