Human Capital Investment After the Storm

69 Pages Posted: 19 May 2020 Last revised: 27 May 2021

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 4, 2020

Abstract

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

Billings, Stephen B. and Gallagher, Emily and Ricketts, Lowell, Human Capital Investment After the Storm (May 4, 2020). Available at SSRN: https://ssrn.com/abstract=3592609 or http://dx.doi.org/10.2139/ssrn.3592609

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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