Local Public Finance Dynamics and Hurricane Shocks

Since 1980, over 2,000 local governments in US Atlantic and Gulf states have been hit by a hurricane. We study local government revenue, expenditure, and borrowing dynamics in the aftermath of hurricanes. These shocks reduce tax revenues and expenditures and increase the cost of debt in the decade following exposure. Municipalities with a racial minority composition 1 standard deviation above the sample mean suffer expenditure losses more than 2 times larger and debt default risk 8 times larger than municipalities with average racial composition in the decade following a hurricane strike. These results suggest that climate change can exacerbate environmental justice challenges.

Dr. Rhiannon Jerch is an Assistant Professor in the Department of Economics at Temple University.