The Economic Impact of Hurricanes in the US: Does Local Finance Matter?
50 Pages Posted: 4 Nov 2020
Date Written: December 1, 2019
This paper examines the role of local lenders during recoveries from 33 hurricanes between 1999 and 2019, using a novel dataset of residential and commercial losses. I estimate the average effect of local finance and identify necessary conditions allowing lenders to mitigate employment shocks. The evidence consistently shows that higher access to local finance dampens the county employment contractions at the average industry, at individual sectors (except manufacturing), at smaller businesses, and dur- ing block-buster/less-costly disasters. Community banks aid the recovery by both identifying firms with potential to survive and avoiding direct loan losses. To support the former, I show that local finance has a stronger effect in more productive counties. In support of the latter, I show that local finance has a stronger effect in more spatially/geographically dispersed counties, and that smaller community banks outperform/lend more than bigger ones within affected counties.
Keywords: Natural Disasters, Bank Lending, Resilience, Community Banks, Employment shocks
JEL Classification: R11
Suggested Citation: Suggested Citation