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Effects of Wildfire Destruction on Migration, Consumer Credit, and Financial Distress

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Abstract

The scale of wildfire destruction has grown exponentially in recent years, destroying nearly 25,000 buildings in the United States during 2018 alone. However, there is still limited research exploring how wildfires affect migration patterns and household finances. In this study, we evaluate the effects of wildfire destruction on in-migration and out-migration probability at the Census tract level in the United States from 1999 to 2018. We then shift to the individual level and examine changes in homeownership, consumer credit usage, and financial distress among people whose neighborhood suffered damaging fires. We pair quarterly observations from the Federal Reserve Bank of New York/Equifax Consumer Credit Panel with building destruction counts from the US National Incident Management System/Incident Command System database of wildfire events. Our findings show significantly heightened out-migration probability among tracts that experienced the most destructive wildfires, but no effect on in-migration probability. Among the consumer credit measures, we find a significant drop in homeownership among those treated by major fires. This is concentrated in people over the age of 60. Measures of credit distress, including delinquencies, bankruptcies, and foreclosures, improve rather than deteriorate after the fire, but the changes are not statistically significant. While wildfire effects on migration and borrowing are measurable, they are not yet as large as those observed following other natural disasters such as hurricanes.

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  • Jennifer Balch & Katherine Curtis & Jack DeWaard & Elizabeth Fussell & Kathryn McConnell & Kobie Price & Lise St. Denis & Stephan D. Whitaker, 2021. "Effects of Wildfire Destruction on Migration, Consumer Credit, and Financial Distress," Working Papers 21-29, Federal Reserve Bank of Cleveland.
    • Handle: RePEc:fip:fedcwq:93562
    DOI: 10.26509/frbc-wp-202129
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    Cited by:

    1. Xudong An & Stuart A. Gabriel & Nitzan Tzur-Ilan, 2024. "Extreme Wildfires, Distant Air Pollution, and Household Financial Health," Working Papers 24-01, Federal Reserve Bank of Philadelphia.
    2. Meier, Sarah & Elliott, Robert J.R. & Strobl, Eric, 2023. "The regional economic impact of wildfires: Evidence from Southern Europe," Journal of Environmental Economics and Management, Elsevier, vol. 118(C).

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    More about this item

    Keywords

    wildfires; Migration; Consumer Credit;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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