Exogenous Responses and Endogenous Recovery: How Federal Disaster Relief Affects Disaster Recovery

Abstract

Natural disasters have become increasingly severe and frequent in the United States. The result of this has been an outpouring of federal aid to support communities impacted by these disasters. However, there has been little literature that explores the effectiveness of these federal monies. This study addresses this by using a hierarchical model to measure the effectiveness of several federal aid programs, including monies from the U.S. Small Business Administration, the U.S. Department of Agriculture, and the Federal Emergency Management Agency, on a variety of economic indicators for the state of Louisiana. In addition, the modeling structure examines whether these effects differ between economic regions. The results show a robust positive impact for federal aid programs across all measures. While variance in these results can be attributed to between-region differences, these results suggest that federal government has put together an overall effective response to natural disasters.