Brigitte Roth Tran

We use individual-level credit data to study how recent declines in Appalachian coal mining affected household finances between 2011 and 2018. Using exogenous variation in electricity sector demand for coal, we find declines in coal demand decreased credit scores and increased financial distress within two years of coal shocks. These effects cannot be explained solely by job losses in coal mine worker households. Credit score declines and financial distress were largest among older individuals and people with lower-middle credit scores. Our results suggest the energy transition away from fossil fuels may impose meaningful costs on other fossil fuel extraction communities.

We use nearly four decades of U.S. county data to study dynamic local economic impacts of natural disasters that trigger federal aid. We find these disasters on average raise personal income per capita in the longer run (8 years out). We also find that, in the longer run, wages and home prices are higher, while employment and population are unaffected, suggesting 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 the longer-run income boost is driven primarily by hurricanes and tornadoes. We also find 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. A spatial spillover analysis suggests the longer-run net effects of local aid-inducing disasters for wider regions are near-zero.

We empirically analyze firm-level uncertainty generated from extreme weather events, guided by a theoretical framework. Stock options of firms with establishments in a hurricane’s (forecast) landfall region exhibit large implied volatility increases, reflecting significant uncertainty (before) after impact. Volatility risk premium dynamics reveal that investors underestimate such uncertainty. This underreaction diminishes for hurricanes after Sandy, a salient event that struck the U.S. financial center. Despite constituting idiosyncratic shocks, hurricanes affect hit firms’ expected stock returns. Textual analysis of calls between firm management, analysts, and investors reveals that discussions about hurricane impacts remain elevated throughout the long-lasting high-uncertainty period after landfall.

I apply a novel machine-learning based “weather index” method to daily store- level sales data for a national apparel and sporting goods brand to examine short-run responses to weather and long-run adaptation to climate. I find that even when considering potentially offsetting shifts of sales between outdoor and indoor stores, to the firm’s website, or over time, weather has significant persistent effects on sales. This suggests that weather may increase sales volatility as more severe weather shocks be- come more frequent under climate change. Consistent with adaptation to climate, I find that sensitivity of sales to weather decreases with historical experience for precipitation, snow, and cold weather events, but-surprisingly-not for extreme heat events. This suggests that adaptation may moderate some but not all of the adverse impacts of climate change on sales. Retailers can respond by adjusting their staffing, inventory, promotion events, compensation, and financial reporting.

How much, if at all, should an endowment invest in a firm whose activities run counter to the charitable missions the endowment funds? I offer the first model characterizing this type of investment decision. I introduce a strategy called “mission hedging,” where—in contrast to traditional socially responsible investing—foundations may benefit from skewing investment toward the objectionable firm in order to align funding availability with need. I characterize the trade-offs driving foundation investment decisions. By leveraging the idiosyncratic firm risk typically diversified away in profit-maximizing portfolios, foundations may find that bad actors provide good opportunities to hedge mission-specific risks.

Discounting plays a major role in the life cycle of environmental and natural resource policies. Evaluating centuries-scale problems like climate change with standard discount rates yields results that many find ethically unacceptable. Paradoxes abound. Low discount rates are urged for determining the net benefits of climate change, while households fail to undertake energy conservation actions that have payback periods of only a few years. Efforts to uncover discount rates from revealed and stated preferences suggest that a variety of confounding factors may be simultaneously in play. Common property resources provide an example of how market failures can lead to behavior consistent with extreme discounting that can be addressed through effective policy. Finally, politicians who make ultimate policy decisions may have incentives to act in accordance with discount rates not socially optimal.