Household Finance after a Natural Disaster: The Case of Hurricane Katrina†

Household Finance after a Natural Disaster: The Case of Hurricane Katrina† AbstractLittle is known about how affected residents are able to cope with the financial shock of a natural disaster. This paper investigates the impact of flooding on household finance. Spikes in credit card borrowing and overall delinquency rates for the most flooded residents are modest in size and short-lived. Greater flooding results in larger reductions in total debt. Lower debt levels are driven by homeowners using flood insurance to repay their mortgages rather than to rebuild. Mortgage reductions are larger in areas where reconstruction costs exceeded pre-Katrina home values and where mortgages were likely to be originated by nonlocal lenders. (JEL D14, G21, G22, Q54) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Economic Policy American Economic Association

Household Finance after a Natural Disaster: The Case of Hurricane Katrina†

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Publisher
American Economic Association
Copyright
Copyright © 2017 © American Economic Association
ISSN
1945-7731
D.O.I.
10.1257/pol.20140273
Publisher site
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Abstract

AbstractLittle is known about how affected residents are able to cope with the financial shock of a natural disaster. This paper investigates the impact of flooding on household finance. Spikes in credit card borrowing and overall delinquency rates for the most flooded residents are modest in size and short-lived. Greater flooding results in larger reductions in total debt. Lower debt levels are driven by homeowners using flood insurance to repay their mortgages rather than to rebuild. Mortgage reductions are larger in areas where reconstruction costs exceeded pre-Katrina home values and where mortgages were likely to be originated by nonlocal lenders. (JEL D14, G21, G22, Q54)

Journal

American Economic Journal: Economic PolicyAmerican Economic Association

Published: Aug 1, 2017

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