Hou paper on financial shocks of natural disasters published in National Tax Journal
Feb 28, 2018
Qing Miao, Yilin Hou & Michael Abrigo
National Tax Journal, February 2018
This paper employs panel vector autoregression to examine the dynamic fiscal response to natural disasters. With 50-state, 1970–2013 panel data on state government finance and disaster damage, the authors estimate disaster impacts on revenue, expenditure, debt issuance, and federal-state transfers. They find that following a disaster, states increase program expenditure and receive more federal transfers. Disasters have limited impact on total tax revenues but amplify fluctuations in sales, income, and property tax revenues. The authors' findings suggest that disaster-induced additional spending is largely financed through federal transfers, which include not only disaster relief funds but also non-disaster-related public welfare assistance.