The Impact of Hurricanes on Wages and Employment: The Case of Louisiana

Abstract

The shortcomings of a commonly used technique, difference in difference, have recently been addressed with Generalized Difference in Difference (GDD) method. This study relaxes some of the restrictions of GDD and utilizes hurricanes as exogenous shocks to determine their impact on wages and employment in three different industries (construction, manufacturing, and leisure & hospitality) in Louisiana from 2001 to 2010. The results suggest that the hurricanes have a significant adverse effect on wages in construction and leisure & hospitality sectors. During the time period studied, the parishes that are directly hit by a hurricane suffer a 6 percent drop in wages in leisure and hospitality sector while the neighboring parishes suffer 5 percent drop in construction sector.