Let the Rich Be Flooded: The Unequal Impact of Hurricane Harvey on Household Debt

58 Pages Posted: 13 Jun 2019 Last revised: 24 Mar 2020

See all articles by Stephen B. Billings

Stephen B. Billings

University of Colorado - Boulder

Emily Gallagher

University of Colorado at Boulder - Department of Finance; Federal Reserve Banks - Federal Reserve Bank of St. Louis

Lowell Ricketts

Federal Reserve Banks - Federal Reserve Bank of St. Louis

Date Written: May 30, 2019

Abstract

Hurricane Harvey submerged over 25% of Houston in August 2017. Using a treatment intensity difference-in-difference design on consumer credit data, we find that average treatment effects of flooding mask substantial heterogeneity by initial financial well-being and homeownership status. Negative financial outcomes are concentrated among homeowners who entered the hurricane in a weaker financial position. For example, within financially constrained, owner-occupied areas, the average bankruptcy rate was 0.7 percentage points (or 28%) higher in heavily flooded areas after Harvey than in similar areas that did not flood. Being in a floodplain and, hence, having a higher likelihood of flood insurance, largely mitigates these negative effects. Using individual FEMA registrant and SBA loan data, we present evidence that our results may be explained, in part, by severe inequalities in access to federal disaster assistance and loans.

Keywords: inequality, financial constraint, bankruptcy, student debt, natural disaster, FEMA, SBA, wealth effects

JEL Classification: Q54, H84, D0, D1, R2

Suggested Citation

Billings, Stephen B. and Gallagher, Emily and Ricketts, Lowell, Let the Rich Be Flooded: The Unequal Impact of Hurricane Harvey on Household Debt (May 30, 2019). Available at SSRN: https://ssrn.com/abstract=3396611 or http://dx.doi.org/10.2139/ssrn.3396611

Stephen B. Billings

University of Colorado - Boulder ( email )

Leeds School of Business
Koelbel Building
Boulder, CO US 80309
United States

Emily Gallagher (Contact Author)

University of Colorado at Boulder - Department of Finance ( email )

Campus Box 419
Boulder, CO 80309
United States

Federal Reserve Banks - Federal Reserve Bank of St. Louis ( email )

411 Locust St
Saint Louis, MO 63011
United States

Lowell Ricketts

Federal Reserve Banks - Federal Reserve Bank of St. Louis ( email )

411 Locust St
Saint Louis, MO 63011
United States

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