Search Results
Working Paper
Last Resort Insurance: Wildfires and the Regulation of a Crashing Market
An increasing number of people are denied home insurance coverage in the private market and must instead turn to state-sponsored plans known as “Insurers of Last Resort.” This paper examines how insurers of last resort interact with the private market under increasing disaster risks. We first present a simple model of an adversely selected insurance market, highlighting that the insurer of last resort allows strict price regulation to be compatible with full insurance. We then empirically study the California non-renewal moratoriums, a regulation that forced insurers to supply insurance ...
Working Paper
Effects of Wildfire Destruction on Migration, Consumer Credit, and Financial Distress
The scale of wildfire destruction has grown exponentially in recent years, destroying nearly 25,000 buildings in the United States during 2018 alone. However, there is still limited research exploring how wildfires affect migration patterns and household finances. In this study, we evaluate the effects of wildfire destruction on in-migration and out-migration probability at the Census tract level in the United States from 1999 to 2018. We then shift to the individual level and examine changes in homeownership, consumer credit usage, and financial distress among people whose neighborhood ...
Working Paper
California Wildfires, Property Damage, and Mortgage Repayment
This paper examines wildfires’ impact on mortgage repayment using novel data that combines property-level damages and mortgage performance data. We find that 90-day delinquencies were 4 percentage points higher and prepayments were 16 percentage points higher for properties that were damaged by wildfires compared to properties 1 to 2 miles outside of the wildfire, which suggests higher risks to mortgage markets than found in previous studies. We find no significant changes in delinquency or prepayment for undamaged properties inside a wildfire boundary. Prepayments are not driven by ...
Journal Article
Wildfires and Real Estate Values in California
Wildfires have been a concern in California for decades. The intensity of these events has increased recently, with particularly large and destructive fire seasons between 2018 and 2021. Analysis shows that distance from high fire-risk zones had little impact on residential housing values in the past. However, that has changed since the late 2010s, coinciding with more extensive fire damage to land and structures across the state. Insurance availability appears to help little in preserving home values in areas that are considered more at risk.
Journal Article
Rising Wildfire Risk for the 12th District Economy
The growing risk from natural disasters is a key economic effect of climate change. Severe wildfires are a leading example, and they are particularly important for the western states that make up the 12th Federal Reserve District. Analyzing data on wildfire hazard and economic activity confirms that these states are substantially more exposed to wildfire risk than the rest of the country. This gap in regional wildfire risk is likely to grow over time as climate change continues.
Journal Article
Disruptions from Wildfire Smoke: Vulnerabilities in Local Economies and Disadvantaged Communities in the U.S.
Wildfires, which are increasing in frequency, duration, and intensity, are measurably affecting vulnerable populations, labor, housing, and education. This report describes how wildfire smoke disrupts various sectors of the economy across the United States. Wildfire smoke is a growing problem for groups that face greater economic barriers than the general population, such as low-income families, housing-vulnerable communities, and frontline workers.
Report
How Bad Are Weather Disasters for Banks?
Not very. We find that weather disasters over the last quarter century had insignificant or small effects on U.S. banks’ performance. This stability seems endogenous rather than a mere reflection of federal aid. Disasters increase loan demand, which offsets losses and actually boosts profits at larger banks. Local banks tend to avoid mortgage lending where floods are more common than official flood maps would predict, suggesting that local knowledge may also mitigate disaster impacts.
Working Paper
Air Pollution and Rent Prices: Evidence from Wildfire Smoke Plumes
We leverage quasi-experimental wildfire smoke shocks to analyze the causal effect of air pollution (PM2.5) on rent prices, using satellite-based smoke plumes data and ambient air pollution data. Our results indicate that the rent of homes that are not directly affected by wildfires but exposed to wildfire plumes declines by about -2.4% per one standard deviation increase in PM2.5. The response of home prices is more than threefold highlighting a gap in the tolerance of poor air quality, which we find is driven by age-related differences between tenants and homeowners. We further show evidence ...
Working Paper
Up in Smoke: The Impact of Wildfire Pollution on Healthcare Municipal Finance
Wildfire smoke pollution is associated with significantly higher healthcare municipal borrowing costs, amounting to $250 million in realized interest costs for high-smoke counties in 2010–2019, and an estimated $570 million over the following 10 years. These costs are disproportionately higher in high-poverty or high-minority areas where there is more smoke-related uncompensated care. Out-of-state smoke is also associated with higher borrowing costs, suggesting poor wildfire management imposes externalities on nearby states. Our hospital-level analysis shows increases in asthma cases and ...