Fires and local labor markets

We study the dynamic effects of fires on county labor markets in the US using a novel geophysical measure of fire exposure based on satellite imagery. We find increased fire exposure depresses employment growth for about three years, with part of the medium-run effects being linked to migration. In counties that experience fires, the cumulative fire-induced decline over 3 years is on the order of 15% of employment growth over that horizon, on average. These effects appear to be driven by the fires burning more than 1.5% of county area. While very few fires in our data receive a federal disaster declaration and aid from the Federal Emergency Management Agency (FEMA), FEMA declarations appear to reverse the estimated effects on employment and migration. We also document that counties with more diversified economies and more educated workforces appear to be more resilient against fire shocks. By overcoming challenges in measuring fire impacts, we identify vulnerable places and economic states, offering guidance on tailoring relief efforts and contributing to a broader understanding of natural disasters’ economic impacts.