How Hurricanes Affect Employment and Wages in Local Labor Markets

13 Pages Posted: 23 May 2008  

Ariel R. Belasen

Southern Illinois University at Edwardsville - Department of Economics

Solomon W. Polachek

State University of New York at Binghamton; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Abstract

This paper adopts a generalized-difference-in-difference (GDD) technique outlined in Ariel R. Belasen and Solomon W. Polachek (IZA Discussion Paper #2976) to examine the impact of hurricanes on the labor market. We find that earnings of the average worker in a Florida county rises over 4% within the first quarter of being hit by a major Category 4 or 5 hurricane relative to counties not hit, and rises about 1¼% for workers in Florida counties hit by less major Category 1-3 hurricanes. Concomitantly, employment falls between 1½ and 5% depending on hurricane strength. On the other hand, the effects of hurricanes on neighboring counties have the opposite effects, moving earnings down between 3 and 4% in the quarter the hurricane struck. To better examine the specific shocks, we also observe sectoral employment shifts. Finally, we conduct a time-series analysis and find that over time, there is somewhat of a cobweb with earnings and employment rising and falling each quarter over a two-year time period.

Keywords: exogenous shock, difference-in-difference estimation, local labor market, earnings, employment, sectoral shifts

JEL Classification: J23, J49, Q54, R11

Suggested Citation

Belasen, Ariel R. and Polachek, Solomon W., How Hurricanes Affect Employment and Wages in Local Labor Markets. , Vol. , pp. -, . Available at SSRN: https://ssrn.com/abstract=1136212 or http://dx.doi.org/10.1111/j.0042-7092.2007.00700.x

Ariel R. Belasen (Contact Author)

Southern Illinois University at Edwardsville - Department of Economics ( email )

Edwardsville, IL 62026-1102
United States

Solomon W. Polachek

State University of New York at Binghamton ( email )

Binghamton, NY 13902-6000
United States
607-777-2144 (Phone)
607-777-4900 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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