The Local Economic Impact of Natural Disasters

Author(s): Brigitte Roth Tran and Daniel Wilson

We study the dynamic responses of local economies after natural disasters in the U.S. using county-level data over the past four decades. We find disasters increase income total and per capita income over the longer run (8 years out). The effect is driven initially by an employment boost and in the longer run by higher wages. Over the longer run, house prices increase while population is roughly flat, especially in areas with inelastic housing supply, pointing to increases in housing demand, potentially reflecting increases in local amenities and/or productivity. The longer-run increase in income is largest for the most damaging disasters. It is especially apparent for hurricanes and tornados but absent for floods. The longer run increase in income, which has fallen over time, is independent of recent disaster experience. State level and spatial spillover analyses point to offsetting negative effects of local disasters on other counties within the region.

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Article Citation

Roth Tran, Brigitte, and Daniel Wilson. 2023. "The Local Economic Impact of Natural Disasters," Federal Reserve Bank of San Francisco Working Paper 2020-34. Available at https://doi.org/10.24148/wp2020-34