The Effect of Hurricane Katrina on the Labor Market Outcomes of Evacuees

We use data from the Current Population Survey collected both before and after Hurricane Katrina to estimate the impact of Katrina on the labor market outcomes of evacuees. Our estimates are based on a difference-in-differences strategy that compares evacuees to all residents of Katrina-affected areas prior to Katrina, with a control group consisting of individuals who originally resided outside the areas affected by the storm. We estimate that Katrina had substantial effects on the labor market outcomes of evacuees over the 13-month period immediately following Katrina. However, our estimates suggest that the effects of Katrina diminished substantially over time as evacuees recovered from the hurricane and adjusted to new economic and social conditions. Evacuees who did not return to their pre-Katrina areas have fared much worse in the labor market than have those who returned. Differences in individual and family characteristics account for some of the differences in outcomes between returnees and non-returnees. We present evidence that non-returnees have fared much worse in the labor market primarily because they came from areas that experienced greater housing damage due to the storm and thus were more likely to have had their lives severely disrupted.