Facts about Hurricane Katrina, and the benefits of regional migration

In 2006, the year after the storm, wage and salary income for the average Katrina victim in our sample is roughly $2,200 lower than their matched counterparts.  Remarkably, the earnings gap is erased the following year, and by 2008, the hurricane victims actually have higher wage income and total income than control households.

That is from a new NBER working paper by Tatyana Deryugina, Laura Kawano, and Steven Levitt.  I agree with this claim:

…strong ties to a place, especially a place with limited economic opportunities such as New Orleans, have adverse economic consequences.  When forced by an exogenous shock to migrate, people are able to choose from a wide range of possible locations to move to, and they seem to choose places that offer them better economic opportunities.

You will find an ungated version here.


I think it's healthier for society as well, as migration (for work) would tend to break family and ethnic ties that can foster corruption, and instead develop stronger civic bonds with neighbors and townsfolk.

Atomized, hardworking, childless strangers are much better for the economy.

At least *someone* gets it.

Don't discount the value of geographic bachelors. I expect there are a lot of those working the North Dakota oil fields. Separated from family they work like childless singles, especially since they are incentivized to build up chunks of time off to visit home.

Barbara Bush was excoriated for saying that survivors would in the long run be better off in living and working in Houston than back in the Lower 9th Ward in New Orleans, but I guess she was right.

Why? Because they make $2200/yr. more? How would you or I or Ms. Bush know whether they are better off because of that?

…strong ties to a place, especially a place with limited economic opportunities such as New Orleans, have adverse economic consequences.

Adverse financial consequences perhaps, but so what? Buying a house in a neighborhood you really like might cost more than some other apparently similar house, but no one talks about "adverse economic consequences." How is choosing to live in N.O. at a cost of $2200/ yr. in income any diffrenet or less rational.

And let's add one point. New Orleans residents tend to be much more attached to the city than residents of most other places. It exerts a very strong pull. Why is that bad?

New Orleans' "Let the Good Times Roll" culture of hedonism proved detrimental on average to poor blacks in the long run, as the dismaying pre-Katrina social statistics for blacks in New Orleans suggested. African-Americans seem to do somewhat better in conservative, business-oriented cultures like those seen in Texas metro areas and in Atlanta.

I believe you're missing the point here. If those who survived the hurricane would be better off moving to those areas to earn more, then why didn't they do so in the first place? Clearly they valued their current social ties and the cost of moving more than the anticipated increase in income.

The hurricane destroyed their best alternative, their second best alternative is what is observed now. Probably not even that, because they didn't have the alternative of searching. To argue that they're better off is to make the broken window fallacy.

Connoisseurs will recognize that here Steve is quoting one of his own most notorious statements, that provoked an outburst of righteous condemnation by John Podhoretz back when it took place.

So much of contemporary social policy (charter schools, Section 8) consists of trying to get blacks out of the hands of corrupt/incompetent black-run institutions, and into better-run non-black ones. Of course, at a certain point this provokes "flight" -- wash rinse repeat.

New Orleans culture was detrimental in general, in certain respects, to everyone who lived there.

And I am not merely talking about hedonism. The political culture is hugely corrupt, and pretty much always has been, and too many of the city's elite are more interested in Mardi Gras balls and the like than in economic development, education, and so on.

Let's be careful who we blame.

Right, New Orleans' culture based on inherited wealth, sin tourism, and the like produced a lot of great art in the first half of the 20th Century, but in the long run was detrimental to poor blacks.

Whites don't pay much attention to regional differences among African-Americans, but if you looked before Hurricane Katrina, New Orleans and Milwaukee/Madison would rank near the bottom for black well-being. The metro areas of Atlanta and some Texas cities would be toward the top. My surmise is that a conservative Protestant business-oriented culture is pretty good for the moral and economic flourishing of African-Americans, while Catholic hedonism (New Orleans) or Germanic welfare stateism (Milwaukee) are not.

"strong ties to a place, especially a place with limited economic opportunities such as New Orleans, have adverse economic consequences."

It's truly embarrassing that, in 2014, there are still people beknighted enough to make decisions based on something other than a purely economic calculus. It's incredible to me - and to all right-thinking people - that these rubes would cling to fuzzy ideas like "culture," "family," and "community" over $2,200 in pure hard cash. Obviously any rational actor would take the raise and purchase $2,100 worth of family in the new location. It's a win-win.

The authors of the paper are certainly not making this claim:
"we find that the increase in wage earnings was concentrated among those who eventually returned to New Orleans. Moreover, we find that housing costs in New Orleans increased by roughly the same amount as wage incomes, relative to control cities. These two facts suggest that while the incomes and employment of Hurricane Katrina victims recovered quickly, the income growth we document reflects nominal, rather than real, increases. Importantly, our results do not imply that the utility of the storm victims improved. We cannot measure the non-pecuniary costs of the disruption created by Hurricane Katrina, but the fact that people tend to stay in a particular place when not hit by exogenous shocks suggests that these costs are high."

Look, if I actually read the papers I opined on I would hardly have had enough time to obtain tenure, now would I?

6 million Mexicans seem to behave like rational actors, immigration law breaking included.

Not to mention there is economic value to having family and connections nearby. If I lived closer to my parents, I could save more than $2200 in child care.

Fascinating. I am looking for more data on neighborhood churn and economic opportunity. Anyone have any Intel? Thanks.

You didn't quote the last line from the abstract:
"Our results provide some optimism regarding the costs of climate-change driven dislocation, especially when adverse events can be anticipated well in advance."

In other words, we should positively encourage climate-change because the resultant migrations will be good for the individuals concerned.

Global War^H^H^H^Climate Change - is there NOTHING it cannot do?

Relevant: capital destruction and firm exit in the wake of Katrina: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2417911

George W Bush loves black people?

I'd argue more than Obama does. GWB certainly hired more competent black people. Obama's legacy unfortunately confirms peoples negative stereotypes of blacks, rather than positive attributes.

...when forced to migrate people seem to choose places with better economic opportunities.

Breathtakingly insightful. A genuine contribution to economic science. The work of three economists to develop this idea and a fourth to agree with them? Is there a lightbulb involved?

The conclusion is that we should periodically destroy bad neighborhoods to force people to move to places with more economic opportunities.

If someone does that they will get both a Noble Prize for Peace & one for Economics.

And when a hurricane devastates Manhattan?

I predict this works only when the disaster strikes a relatively poor locale.

"especially a place with limited economic opportunities such as New Orleans"

But, even in a place with more economic wealth, such a disruption would push those with the least opportunities to change their prospects.

It appears something similar is happening in Ferguson. One business owner, so far, has decided to move on to greener pastures and walk away from the sunk costs. Others may rebuild but make the improvements at the same time that permit them to increase their revenue.

Sticky locations.

We should blow up Detroit.

Just blow a few strategic pillars in the salt mines beneath the city and watch it subside into the sinkhole.

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Suggests that those weekends spent swinging a hammer for Habitat for Humanity might not have been so good for the purported beneficiaries after all. Of course, intention heuristic and all that...

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