The Fiscal Consequences of Natural Disasters: Evidence from the U.S. States

Abstract

The paper investigates the fiscal impact of natural disasters in the U.S. states. The focus is on state spending, state revenues, and federal transfers for the period from 1970 to 2015. Results show that a broad definition based on dollar damages from all emergency events and major disasters has a small effect on state-level fiscal conditions, which stands in contrast to prior studies. On the other hand, a narrower definition based on the occurrence of major disasters is associated with increased spending and transfers alongside spending effects that grow with disaster severity.