Same Storm, Different Disasters: Consumer Credit Access, Income Inequality, and Natural Disaster Recovery

39 Pages Posted: 28 May 2019

See all articles by Brigitte Roth Tran

Brigitte Roth Tran

Board of Governors of the Federal Reserve System

Tamara Lynn Sheldon

University of South Carolina - Moore School of Business - Department of Economics

Date Written: December 15, 2017

Abstract

Natural disasters often produce large income shocks to households. We analyze the impact of natural disasters on household finances. Using a triple differences approach, we estimate the effect of natural disasters on credit card outcomes for individuals in varying financial positions receiving access to different types of FEMA aid. With the exception of those living in low income areas, we find few negative impacts on credit outcomes of most individuals living in areas hit by disasters that qualify for individual and household aid. Though all types of individuals affected by disasters show some signs of increasing credit utilization, the most vulnerable populations are also more likely to declare bankruptcy. While many are able to use credit cards to smooth through negative income shocks from natural disasters, current policy appears to leave the worst off even worse off.

Keywords: household finances; natural disasters

JEL Classification: D14; Q54

Suggested Citation

Roth Tran, Brigitte and Sheldon, Tamara Lynn, Same Storm, Different Disasters: Consumer Credit Access, Income Inequality, and Natural Disaster Recovery (December 15, 2017). Available at SSRN: https://ssrn.com/abstract=3380649 or http://dx.doi.org/10.2139/ssrn.3380649

Brigitte Roth Tran

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Tamara Lynn Sheldon (Contact Author)

University of South Carolina - Moore School of Business - Department of Economics

1014 Greene St
Columbia, SC 29208
United States

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