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Household Financial Decision-Making After Natural Disasters: Evidence from Hurricane Harvey

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  • del Valle, Alejandro
  • Scharlemann, Therese
  • Shore, Stephen

Abstract

We study household credit responses to Hurricane Harvey using new, geographically granular data on credit cards, mortgages, and flooding. Estimates from a differences-in-differences design that exploits the flooding gradient show that affected households only borrow at low-interest rates, often using promotional (zero interest) cards and that they quickly pay down balances. We also document that take-up of forbearance (borrowing by missing mortgage payments without penalty) increases with flooding. These results are attenuated in floodplains, particularly in structures subject by code to physical hardening. Our results indicate that credit acts as a substitute for the lack of physical hardening.

Suggested Citation

  • del Valle, Alejandro & Scharlemann, Therese & Shore, Stephen, 2024. "Household Financial Decision-Making After Natural Disasters: Evidence from Hurricane Harvey," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 59(5), pages 2459-2485, August.
    • Handle: RePEc:cup:jfinqa:v:59:y:2024:i:5:p:2459-2485_15
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    Cited by:

    1. Xuesong You & Carolyn Kousky, 2024. "Improving household and community disaster recovery: Evidence on the role of insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 91(2), pages 299-338, June.

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