Natural disasters and economic performance: Evidence from the Slave Lake wildfire

In May 2011, the municipality of Slave Lake, Alberta was hit by a devastating wildfire; the second costliest natural disaster in Canada at the time. All residents of Slave Lake, except firefighters and the police force, were forced to evacuate to nearby municipalities for at least one month. In this study, we use longitudinal income tax data from 2004 to 2018, to examine the short, medium, and long-term effect of this wildfire on affected individuals. We find that the wildfire led to a drop in total income of 9.5% on average in the seven years following the wildfire, mainly explained by a decrease in employment income. Effects are concentrated in males, and workers in the forestry and agriculture and oil and gas sectors. Based on a back-of-the envelope calculation, our results suggest that disruptions to the labour market-imposed an aggregate cost of $140 million in the seven years following the disaster, which is equivalent to over 10% of commonly cited economic losses associated with the fire.