Human Capital Investment After the Storm
69 Pages Posted: 19 May 2020 Last revised: 27 May 2021
Date Written: May 4, 2020
This paper tests the impact of a major, wealth-destroying natural disaster – Hurricane Harvey (Aug-Sep 2017) – on the use of student debt financing. We find that college-age adults from heavily flooded blocks in Houston are 2.5 percentage points (5.8%) less likely to have student loans than are counterparts from non-flooded blocks. We explain this unexpected decline in student debt by a similar decline in enrollment and graduation rates at more, relative to less, exposed Texas schools. This aggregate decline in enrollment is partially offset by a shift towards college majors that have higher median earnings payoffs, which is suggestive of a scaling back of consumption-based and/or low-return course-taking. Together, results highlight a decrease in both the quantity and the diversity of investments in human capital after the storm.
Keywords: student debt, household finance, financial constraint, wealth shock, natural disaster, FEMA, higher education
JEL Classification: G51, R00, Q54, I22
Suggested Citation: Suggested Citation