Natural Disasters, Financial Shocks, and Human Capital

We examine effects on productivity, employment, and debt outcomes among college students whose parents reside in areas that experience financial shocks caused by natural disasters. After shocks, treated students exhibit poorer academic performance. To boost the impaired GPA, these students sacrifice educational content by withdrawing from more courses and enrolling in fewer STEM courses. Effects are stronger for middle class students likely relying on family income to pay for college. Students mostly mitigate financial shocks with additional part-time employment. Ultimately, disrupted students are 10% more likely to default on student loans. Overall, these results shed light on the effects of financial stress on the intensive margin of human capital formation.

Keywords: Financial shocks, Human Capital, Student loans, Default risk, Household finance, Natural disasters

JEL Classification: D14, H52, H81, I22, I28

Suggested Citation: Suggested Citation

Cornaggia, Jess and Cornaggia, Kimberly and Xia, Han, Natural Disasters, Financial Shocks, and Human Capital (November 25, 2024). Available at SSRN: https://ssrn.com/abstract=4110140 or http://dx.doi.org/10.2139/ssrn.4110140