Tatyana Deryugina, Laura Kawano, and Steven Levitt write,
Four years later, Hurricane Katrina victims are less likely to be unemployed.
…If moving costs (either financial or psychological) are high, then people will rationally forego higher earnings available elsewhere unless the expected benefit of moving is large enough to outweigh the fixed cost. The forced relocation caused by
the hurricane required displaced residents to pay the moving costs, leading to higher wages (although potentially lower utility levels).
Pointer from Tyler Cowen.
The PSST interpretation would be that forced relocation helps the economy more quickly find patterns of sustainable specialization and trade. That is my interpretation of the role that the second world war played in getting the United States out of the Great Depression. Millions of men were uprooted, and many of them chose to relocate to locations with better opportunities. When my late father attended a reunion of Soldan High School in St. Louis, he was stunned by the distance that many of his former classmates had traveled, both geographically and economically, from their home town. He reflected that this never would have happened without the war.
Standard macro would predict (and did predict) a major recession following the war. So might PSST, given the challenge of transition from wartime to peacetime. However, the fact that many returning servicemen actually thought about where they wanted to live after the war helped make the transition work. The paper on Hurricane Katrina suggests a similar effect.
Are they tracking everyone who was living in New Orleans before the storm, or just comparing averages in New Orleans pre and post? A sizeable chunk of the Hot Potato, so to speak, was tossed over to Texas after the storm.
From the NBER abstract:
> Using a panel of tax return data, we provide one of the first comprehensive analyses of the hurricane’s long-term economic impact on its victims.
i.e. tracking individuals and not New Orleans
thx
“That is my interpretation of the role that the second world war played in getting the United States out of the Great Depression.”
Well not that it’s not interesting as a general idea (very Schumpeterian), but other than its effect on unemployment, one can’t credit WWII with any such thing in the first place. The private component of GDP had more or less returned to it’s long term trend curve by 1941. What the war then did was nationalize about half of the economy, hide inflation behind price controls, and reduce unemployment by forcing people into the army. This was a second Depression, but with work this time. Private Investment dropped like a stone during the War, and surged when the Government contracted afterwards. Effectively, from about 1942 to 1946, the US had a Soviet style command economy. The results, from any perspective other than one which places all weight on the military outcome, were predictably atrocious-necessary, maybe, but atrocious.
Or not so major given that there is little guessing about what to do afterwards, retool towards private production filling in the deficiencies that accumulated during it, though it does require bank accommodation.