From Bad to Worse: Natural Disasters and Financial Health

摘要

Many families live on the financial edge, but a natural disaster canthrow even better-situated families into financial turmoil. Comparingthe financial outcomes of residents in areas hit by natural disasterswith otherwise similar people in unaffected communities, this studyfinds that natural disasters lead to declines in credit scores and mortgageperformance, increases in debt in collection, and impacts oncredit card access and debt-effects that persist or even worsenover time. We also find that people who are more likely to be strugglingfinancially before disasters strike are often the hardest hit bythe disaster. Specifically, for people with low pre-disaster creditscores, as well as those who live in a community of color, the estimateddeclines in credit scores are particularly substantial. We find asimilar pattern for mortgage delinquency and foreclosure. This patternof results suggests that disasters may be not only harmful foraffected residents on average, but may also have the effect of wideningalready existing inequalities. Our results also suggest thatmedium-sized disasters, which are less likely to receive long-termpublic recovery funding, lead to larger negative declines on creditscores than large disasters.