The Role of Transfer Payments in Mitigating Shocks: Evidence from the Impact of Hurricanes
63 Pages Posted: 24 Aug 2013
Date Written: August 8, 2013
Little is known about how aggregate economic shocks are mitigated by social safety nets. I use hurricanes as an exogenous shock to the economies of US counties and show that non-disaster government transfers, such as unemployment insurance and public medical spending, increase substantially in the decade after landfall. Indeed, I estimate that the net present value of the increase in non-disaster transfers is more than double that of direct disaster aid. Among the implications of these findings are that the fiscal costs of natural disasters are much larger than previously thought and that existing social safety net programs help to mitigate the effects of macroeconomic shocks.
JEL Classification: Q54, H84, H53
Suggested Citation: Suggested Citation