The Fiscal Cost of Hurricanes: Disaster Aid Versus Social Insurance
Little is known about the fiscal costs of natural disasters, especially regarding social safety nets that do not specifically target extreme weather events. This paper shows that US hurricanes lead to substantial increases in non-disaster government transfers, such as unemployment insurance and public medical payments, in affected counties in the decade after a hurricane. The present value of this increase significantly exceeds that of direct disaster aid. This implies, among other things, that the fiscal costs of natural disasters have been significantly underestimated and that victims in developed countries are better insured against them than previously thought.
I thank Matthew Shapiro and two anonymous referees for helpful comments that significantly improved the paper. I am very grateful to Amy Finkelstein and Michael Greenstone for invaluable feedback and guidance. I thank Kathy Baylis, Jeff Brown, Joseph Doyle, Kerry Emanuel, Don Fullerton, Josh Gottlieb, Tal Gross, Jerry Hausman, Daniel Keniston, Patrick Kline, Steven Levitt, Randall Lewis, Anup Malani, Gilbert Metcalf, Erwann Michel-Kerjan, Nolan Miller, Kevin Murphy, Mariya Pivtoraiko, Jim Poterba, Mar Reguant, Julian Reif, Joseph Shapiro, and Chad Syverson for useful discussions and feedback. I also thank participants at the NBER Universities' Research Conference, the MIT Public Finance Lunch and Political Economy Breakfast, the University of Chicago Applied Microeconomics Lunch, and the Harvard Environmental Economics Lunch. A big thanks goes to Stephanie Sieber for help with spatial data. Jenna Weinstein provided excellent research assistance. Support from the MIT Energy Fellowship and the National Science Foundation is gratefully acknowledged. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.
Tatyana Deryugina, 2017. "The Fiscal Cost of Hurricanes: Disaster Aid versus Social Insurance," American Economic Journal: Economic Policy, vol 9(3), pages 168-198. citation courtesy of