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How Disasters Affect Local Labor Markets: The Effects of Hurricanes in Florida

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Author Info
Ariel R. Belasen (Saint Louis University)
Solomon W. Polachek () (State University of New York at Binghamton and IZA)

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Abstract

Exogenous shocks often impact a local labor market more than at the national level. This study improves upon the standard Difference in Difference (DD) approach by examining exogenous shocks using a Generalized Difference in Difference (GDD) econometric approach that identifies the effects of shocks resulting from hurricanes. Based on the Quarterly Census of Employment and Wages (QCEW) data on earnings and employment, the earnings of an average worker in Florida will increase as much as four percent within the first quarter of being hit directly by a hurricane, whereas the effects of a hurricane occurring in a neighboring county move earnings per worker in the opposite direction by roughly the same percentage. As time goes by, workers in both sets of counties will experience faster growth in their earnings than workers in completely unaffected counties; however, this is coupled with a slower growth rate in employment. Powerful hurricanes have greater effects than their weaker counterparts. Additionally, the shifts in earnings and employment can be traced back, in part, to geographic features of the counties, namely that the coastal and Panhandle counties exhibit greater effects than landlocked counties. Although focus is on hurricanes in Florida, this GDD technique is applicable to a wider range of exogenous shocks.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2976.

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Length: 38 pages
Date of creation: Aug 2007
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Handle: RePEc:iza:izadps:dp2976

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Related research
Keywords: exogenous shock; difference-in-difference estimation; local labor markets; earnings; employment; hurricanes;

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Find related papers by JEL classification:
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
J49 - Labor and Demographic Economics - - Particular Labor Markets - - - Other
Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
R11 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Analysis of Growth, Development, and Changes

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References listed on IDEAS
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Cited by:
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  1. Strobl, Eric, 2008. "The Economic Growth Impact of Hurricanes: Evidence from US Coastal Counties," IZA Discussion Papers 3619, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Belasen, Ariel R. & Polachek, Solomon, 2008. "How Hurricanes Affect Employment and Wages in Local Labor Markets," IZA Discussion Papers 3407, Institute for the Study of Labor (IZA). [Downloadable!]
  3. Richard W. Evans & Yingyao Hu & Zhong Zhao, 2007. "The Fertility Effect of Catastrophe: U.S. Hurricane Births," IZA Discussion Papers 2975, Institute for the Study of Labor (IZA). [Downloadable!]
  4. Strobl, Eric & Walsh, Frank, 2008. "The Re-Building Effect of Hurricanes: Evidence from Employment in the US Construction Industry," IZA Discussion Papers 3544, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
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