The Short-Run, Dynamic Employment Effects of Natural Disasters: New Insights from Puerto Rico

Abstract

We study the short-run, dynamic employment effects of natural disasters. We ex- ploit monthly data for 70 3-digits NAICS industries and 78 Puerto Rican counties over the period 1995-2019. Our exogenous measure of exposure to natural disasters is com- puted using the maximum wind speed recorded in each county during each hurricane. Using panel local projections, we find that after the “average” hurricane, employment falls by 0.5% on average. Across industries, we find substantial heterogeneity in the employment responses. In some industries employment increases, while in others em- ployment decreases after a hurricane. This heterogeneity can be partly explained by input-output linkages.

Keywords: Natural Disasters, Employment, High-Frequency Data, Local Projections

JEL Classification: Q54, E24