Household Finance after a Natural Disaster: The Case of Hurricane Katrina

53 Pages Posted: 11 Jan 2015

See all articles by Justin Gallagher

Justin Gallagher

Case Western Reserve University - Weatherhead School of Management

Daniel A. Hartley

Federal Reserve Bank of Chicago

Date Written: July 16, 2014

Abstract

Little is known about how affected residents are able to cope with the financial shock of a natural disaster. We investigate the impact that flooding from a major US hurricane had on household finance. Spikes in credit card borrowing and overall delinquency rates for the most flooded residents are modest in size and short-lived. Greater flooding results in larger reductions in total debt. Lower debt levels appear to be driven by homeowners using flood insurance to repay their mortgages rather than to rebuild. Debt reductions are larger in census tracts where mortgages were likely to be originated by non-local lenders.

Keywords: Household Finance, Insurance, Natural Disaster

JEL Classification: D14, G21, H84, Q54

Suggested Citation

Gallagher, Justin and Hartley, Daniel A., Household Finance after a Natural Disaster: The Case of Hurricane Katrina (July 16, 2014). FRB of Cleveland Working Paper No. 14-06. Available at SSRN: https://ssrn.com/abstract=2547662 or http://dx.doi.org/10.2139/ssrn.2547662

Justin Gallagher

Case Western Reserve University - Weatherhead School of Management ( email )

364 PBL Building
Cleveland, OH 44106
United States

Daniel A. Hartley (Contact Author)

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

HOME PAGE: http://www.danielaaronhartley.com

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