Household Finance in the Aftermath of Floods and Wildfires

Abstract

This paper investigates the impact of exposure to flood, wildfire and wildfire smoke events on household debts and assets. Focusing on a panel of households located in the contiguous United States between 2011-2019, we examine several categories of debts: total, credit card, medical, mortgage; and assets: total, savings, financial, non-financial. Using information from the Federal Disaster Management Agency (FEMA) on disaster declarations we provide estimates of the contemporaneous treatment effect on households exposed to small scale flood and wildfire events, as well as those that experience major disasters. Using a two-way fixed effects approach, we find that households exposed to non-FEMA floods see an increase in total debt, credit card debt and mortgage debt, while assets are decreasing across all categories. FEMA wildfires mortgage debt decreases, as do total, financial and non-financial assets.

Keywords: debt, assets, disaster, climate change, heterogeneous treatment effects

JEL Classification: G51, G52, Q54, Q58