The Impact of Hurricanes on Trade and Welfare: Evidence from US Port-level Exports
Economics of Disasters and Climate Change, 2020, vol. 4, issue 3, No 10, 625-655
Abstract Hurricanes cause extensive damage and disruption to ports and coastal infrastructure. However, the overall economic consequences of these storms are not necessarily limited to coastal regions. This paper analyzes the indirect effect of hurricanes on trade by considering the connections between affected and unaffected regions through the reliance on coastal ports. The analysis takes advantage of the exogenous variation in hurricane wind speeds at US customs ports to estimate how hurricane activity influences exports shipments originating in unaffected US states. The findings demonstrate that hurricanes have a severe negative impact on bilateral trade flows. For example, a Category 1 storm hitting a port has a similar effect on exports from unaffected US states as a 4% ad valorem tariff. These port-level disruptions aggregate up to broader trade frictions between US states and importing countries through price indices. The empirical estimates and the structure of the theoretical model are used to evaluate counterfactual hurricane scenarios. For example, foreign importers would have been willing to pay over $4 billion to have avoided the additional trade frictions caused by the 2005 hurricane season. Overall, the results shed light on the role of transportation networks in propagating the potential impacts of stronger hurricanes due to climate change.
Keywords: Port-Level trade; Natural disaster impacts; Welfare analysis (search for similar items in EconPapers)
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