Human Capital Investment After the Storm
67 Pages Posted: 19 May 2020 Last revised: 5 Apr 2021
Date Written: May 4, 2020
This paper tests the impact of a major, wealth-destroying natural disaster – Hurricane Harvey (Aug-Sep 2017) – on the use of student debt financing. We find that college-age adults from flooded blocks in Houston are 2.5 percentage points (5.7%) less likely to have student loans than are counterparts from non-flooded blocks. We explain this unexpected decline in student debt by a 13.3% decline in enrollment and a 7.1% drop in graduation rates at the most relative to the least exposed Texas schools. This aggregate decline in enrollment is partially offset by a shift towards college majors that have higher median earnings payoffs, which is suggestive of a scaling back of consumption-based and/or low-return course-taking. Together, results highlight a decrease in both the quantity and the diversity of investments in human capital after the storm.
Keywords: college, enrollment, completion, education, student debt, constraint, natural disaster, FEMA
JEL Classification: Q54, H84, D0, D1, R2, Q54; H84; D0; D1; R2; D14, H52, H81, J24, I23
Suggested Citation: Suggested Citation