An Analysis of the Effect of Hurricanes on Economic Growth and Labor Market Outcomes

Abstract

Hurricanes pose a significant threat to life and property in coastal regions across the Caribbean and the United States. Within the United States, the south coast faces an annual threat in locations that house major economic centers. The disruption in these regions can have far reaching consequences for both individuals and firms who are impacted. For the Caribbean region, the recurrence of hurricanes causes recovery from disasters to be an on-going process. This limits the extent to which these countries can grow economically. In this dissertation I aim to explore the effects of hurricanes on economic agents with the intent of impacting future policy discussions. Chapter 1 investigates the impact of hurricanes on wage and employment growth. I utilize a model of wind intensity to measure the strength of hurricanes within each Florida county. By using a measurement technique that accounts for hurricane intensity variation over time, the results reveal a less severe effect on both wage and employment growth than previously reported. In many respects, the literature supports the notion that hurricanes affect labor markets through labor supply. My results present evidence that suggests labor demand plays as much a role in post disaster labor markets outcomes as does labor supply. As a novel contribution to the literature, I further test this result by using propensity score matching while accounting for the probability of each county to experience a hurricane. My results suggest that hurricanes depress not only employment growth but in fact both employment and wage growth in affected counties. Chapter 2 explores the implications of hurricanes for economic growth in the Small Island Developing States (SIDS) of the Caribbean region. Particularly, I examine the recurrent nature of hurricanes which creates a difficult environment for economic growth to take place.The results of this study finds support for the negative impact of hurricanes on growth. Additionally, the experience of successive hurricane seasons with hurricane strikes contrary to expectations, does not contribute further to the negative impact of the initial hurricane effect in the Caribbean region. Reasons for this are discussed. Countries that experience a gap between hurricanes enjoy better growth outcomes than countries that do not have similar experiences. The findings of this study shines light on the difficulty small islands face to prepare for hurricanes while being in a state of recovery.