Working Paper

Weathering an Unexpected Financial Shock: The Role of Cash Grants on Household Finance and Business Survival

Abstract: We estimate the causal effect of cash grants on household finance and business survival following a natural disaster. Disaster-affected individuals in high damage blocks with access to cash grants have 17% less credit card debt following the disaster than those without access to cash grants. Grants do not reduce negative financial outcomes, but do decrease migration. The grants play a role in mitigating the effects of the shock to businesses; resulting in 18% more establishments and 29% more employees post-disaster in disaster-affected neighborhoods where residents receive grants, relative to disaster-affected neighborhoods where they do not receive grants. These effects are concentrated among small non-manufacturing establishments that rely on local demand.

Keywords: Natural disasters; household finances; regional economic activity;

JEL Classification: D14; Q54; R11;

https://doi.org/10.21033/wp-2019-10

Bibliographic Information

Provider: Federal Reserve Bank of Chicago

Part of Series: Working Paper Series

Publication Date: 2019-10-28

Number: WP-2019-10

Pages: 53 pages