Weathering an Unexpected Financial Shock: The Role of Cash Grants on Household Finance and Business Survival

Abstract

We estimate the causal effect of cash grants on household finance and business survival following a natural disaster. Disaster-affected individuals in high damage blocks with access to cash grants have 17% less credit card debt following the disaster than those without access to cash grants. Grants do not reduce negative financial outcomes, but do decrease migration. The grants play a role in mitigating the effects of the shock to businesses; resulting in 18% more establishments and 29% more employees post-disaster in disaster-affected neighborhoods where residents receive grants, relative to disaster-affected neighborhoods where they do not receive grants. These effects are concentrated among small non-manufacturing establishments that rely on local demand.

Keywords: Natural disasters, households finance, regional economic activity

JEL Classification: D14, Q54, R11