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Title: The Impact of Rebuilding Grants and Wage Subsidies on the Resettlement Choices of Hurricane Katrina Victims

Citation Type: Miscellaneous

Publication Year: 2012

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Abstract: Following Hurricane Katrina, the Louisiana Road Home program provided cash grants directly to individual homeowners to offset repair costs and to encourage rebuilding. I develop a dynamic discrete choice model of New Orleans homeowners’ post-Katrina choices regarding residential locations, home repairs, home sales, and amounts to borrow or save, and I derive and implement a maximum likelihood estimator for the model’s structural parameters. Using simulations I find that the Road Home program significantly increased the fraction of homes rebuilt within four years of Katrina, mostly by relaxing fi- nancing constraints for borrowing constrained households who would have strongly preferred to rebuild even in the absence of a subsidy if the associated costs could have been spread out over time. I find that location preferences are highly heterogeneous, and most households are far enough from the mar- gin with respect to their preferred location that even large location subsidies induce few households to change locations. These findings suggest that disaster-related subsidies to dangerous locations generate substantially smaller economic distortions than would be predicted by spatial equilibrium models with homogeneous agents.

Url: https://sole-jole.org/13344.pdf

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Authors: Gregory, Jesse

Publisher: University of Michigan

Data Collections: IPUMS USA

Topics: Natural Resource Management

Countries: United States