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  3. òòò½Íø Journal: Macroeconomics
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  5. Expecting Floods: Firm Entry, Employment, and Aggregate Implications

òòò½Íø Journal:
Macroeconomics

ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)

Expecting Floods: Firm Entry, Employment, and Aggregate Implications

  • Ruixue Jia
  • Xiao Ma
  • Victoria Wenxin Xie
òòò½Íø Journal: Macroeconomics (Forthcoming)

Abstract

Using county-level and ZIP-code-level data from the United States during 1998–2018, we document: (1) increased flood risk has a large negative impact on firm entry, employment, and output in the long run; and (2) flood events reduce output in the short run while their impact on firm entry and employment is limited. We then develop a quantitative spatial model to characterize how flood risk shapes firms’ location choices and workers’ employment. We find that flood risk reduced U.S. aggregate output by 0.53% in 2018, 23% of which stemmed from direct damages and 77% from long-run adjustments of firms and workers.

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