Disaster Expectations, Home Maintenance, and the Effects of Hurricanes on Local Labor Markets

43 Pages Posted: 17 May 2014

See all articles by Kyle Hood

Kyle Hood

Government of the United States of America - Bureau of Economic Analysis (BEA)

William D. Larson

Federal Housing Finance Agency

Date Written: April 2, 2014

Abstract

We develop a model of a small region with durable housing, endogenous home maintenance, and disaster expectations, in which hurricane strike damage is a function of maintenance decisions. The model implies that declining areas (relative to growing areas) have a less well-maintained housing stock, with several associated predictions on the effects of hurricanes. First, in declining areas, initial hurricane damage to the housing stock is greater, causing substantial job losses, out-migration, and supply-driven wage increases. Second, recovery in declining areas is less complete because for some locations in the area, the asset value of destroyed homes is less than the replacement cost. Areas with a history of hurricane strikes undertake higher levels of maintenance, making them more resilient to the effects of hurricanes. Empirical evidence supports each of these predictions, and results are notably robust to the exclusion of Hurricane Katrina in 2005.

Keywords: Urban Decline, Regional Dynamics, Natural Disasters, Housing Maintenance

JEL Classification: R11, R31, Q54

Suggested Citation

Hood, Kyle and Larson, William D., Disaster Expectations, Home Maintenance, and the Effects of Hurricanes on Local Labor Markets (April 2, 2014). Available at SSRN: https://ssrn.com/abstract=2437637 or http://dx.doi.org/10.2139/ssrn.2437637

Kyle Hood

Government of the United States of America - Bureau of Economic Analysis (BEA) ( email )

1441 L Street NW
Washington, DC 20910
United States

William D. Larson (Contact Author)

Federal Housing Finance Agency ( email )

400 7th Street SW
Washington, DC 20552
United States

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