Document Type

Working Paper


Fall 12-2016


Natural Disaster, Panel Vector Autoregression, Intergovernmental Transfer




Economics | Emergency and Disaster Management | Income Distribution | Public Affairs, Public Policy and Public Administration


This paper employs panel vector autoregression to examine the dynamic fiscal response to disaster shocks. With 50-state, 1970-2013 panel data of state government finance and disaster damage, we estimate disaster impacts on revenue, expenditure, debt issuance, and intergovernmental transfers. We find that following a disaster, states increase program expenditure, but receive more federal transfers. Disasters have limited impact on total tax revenues but amplify fluctuations in sales, income, and property tax revenues. Our 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 aids.



Additional Information

Working paper no. 199

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Creative Commons Attribution 3.0 License
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