The Effects of Extreme Wildfire and Smoke Events on Household Financial Outcomes

We evaluate the impact of extreme US wildfires and related smoke and air pollution events on household mobility, housing and financial outcomes. The analysis relies on information on the fire burn footprint and related structure damage from the US National Incident Command System, high-resolution smoke plume information from remote satellite sensing data, and measurements of changes in air quality from ground-level pollution monitors. We focus on extreme wildfires over the 2016-2020 period and use the variation in fire, smoke and pollution incidence within and beyond treatment areas to assess event outcomes. Our findings show significantly heightened credit distress among households that experienced the most destructive wildfires. Further, extreme wildfire events resulted in sizable house price declines and net out-migration from fire zones. More distant wildfire-related smoke and air pollution resulted in higher levels of credit card and mortgage defaults. The paper provides new estimates of broad adverse household financial effects associated both with direct wildfire and related indirect smoke and pollution events