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

53 Pages Posted: 27 Nov 2019 Last revised: 22 Jun 2020

See all articles by Justin Gallagher

Justin Gallagher

Case Western Reserve University - Weatherhead School of Management

Daniel A. Hartley

Federal Reserve Bank of Chicago

Shawn M. Rohlin

Rochester Institute of Technology (RIT) - Department of Economics

Date Written: May 21, 2020

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

Suggested Citation

Gallagher, Justin and Hartley, Daniel A. and Rohlin, Shawn M., Weathering an Unexpected Financial Shock: The Role of Cash Grants on Household Finance and Business Survival (May 21, 2020). FRB of Chicago Working Paper No. WP-2019-10, Available at SSRN: https://ssrn.com/abstract=3494190 or http://dx.doi.org/10.21033/wp-2019-10

Justin Gallagher (Contact Author)

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

364 PBL Building
Cleveland, OH 44106
United States

Daniel A. Hartley

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

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

Shawn M. Rohlin

Rochester Institute of Technology (RIT) - Department of Economics ( email )

92 Lomb Memorial Drive
Rochester, NY 14623-5604
United States

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