Taken by Storm: Business Survival in theAftermath of Hurricane Katrina∗

Emek Basker and Javier Miranda

Fifth Annual Microeconomics ConferenceFederal Trade Commission

November 2012

Disclaimer: The views expressed are those of the authors and not necessarily those of

the U.S. Census Bureau. All results have been reviewed to ensure that no confidential

information is disclosed.

Sharkheads Souvenir Store, Biloxi, MS

Source: Monsterchef.net

Which Businesses Survived the Storms?

I Damaged vs. undamaged

I Small firm vs. large firm

I Far from bank vs. near bank

Which Businesses Survived the Storms?

I Damaged vs. undamaged

I Small firm vs. large firm

I Far from bank vs. near bank

Which Businesses Survived the Storms?

I Damaged vs. undamaged

I Small firm vs. large firm

I Far from bank vs. near bank

Which Businesses Survived the Storms?

I Damaged vs. undamaged

I Small firm vs. large firm

I Far from bank vs. near bank

Which Businesses Survived the Storms?

I Damaged vs. undamaged

I Small firm vs. large firm

I Far from bank vs. near bank

Data Sources

I Longitudinal Business Database (LBD)

I Geocoded all MS stores, restaurants, and hotels

I Federal Emergency Management Administration (FEMA)

I Economic Census

Katrina Damage: Hancock & Harrison Counties, MS

Mississippi Trends

Exit Models

I Cross-sectional linear probability models

I Damage vector:I Limited/moderate damageI Extensive/catastrophic damage

I Firm size interacted with damage vector

I Additional controls: establishment age and employment,productivity, productivity×damage, 82 county FE, 110six-digit NAICS FE

I Three time periods:I 2004–06 (short run)I 2004–08 (long run)I 2002–04 (falsification exercise)

Prob(Exit | Extensive or Catastrophic Damage)− Prob(Exit | No Damage)

Bank Proximity

I Geocoded all MS banks, calculated distance to nearest bankor bank branch (LBD)

I Triple-difference regression: interact distance with damagevector, firm size, and damage×firm size

I Continue to control all other covariates

Prob(Exit | Extensive or Catastrophic Damage,FirmSize=1) − Prob(Exit | No Damage, FirmSize=1)

Counterfactual?

Prob(Exit | Extensive or Catastrophic Damage,FirmSize=1) − Prob(Exit | No Damage, FirmSize=1)

Summary

I Vulnerable establishments are more likely to exit immediatelyfollowing damage

I Establishments in small firms

I Establishments located far from banks

I Establishments in small firms located far from banks

I Evidence consistent with credit/resource constraints

I Credit?

I Insurance?

I Information?

I Skill?

Summary

I Vulnerable establishments are more likely to exit immediatelyfollowing damage

I Establishments in small firms

I Establishments located far from banks

I Establishments in small firms located far from banks

I Evidence consistent with credit/resource constraints

I Credit?

I Insurance?

I Information?

I Skill?

Sharkheads Souvenir Store, Biloxi, MS

Source: Sharkheads.com

Thank you