The economic effects of financial relief delays following a natural disaster

Abstract

ABSTRACT In the U.S. the economic damages of natural disasters have increased substantially over time. While private insurance payouts tend to arrive relatively quickly, federal recovery monies are often allocated unevenly, with some communities waiting years to receive previously designated funds. We examine the costliness of delay by linking an economic model of the Joplin, Missouri economy to a civil engineering model that replicates the damage from a tornado that devastated the community in 2011. Building damage estimates from the natural hazard and engineering models are translated into capital stock losses, which subsequently impact the local economy through lost output. We examine several different recovery paths, with a focus on differences in the timing of recovery assistance. Our results show that delaying financial assistance can have important, irretrievable adverse outcomes in the short run.