COPING WITH ECONOMIC AND ENVIRONMENTAL SHOCKS: INSTITUTIONS AND OUTCOMES: Moving to Higher Ground: Migration Response to Natural Disasters in the Early Twentieth Century.

Areas differ in their propensity to experience natural disasters. Exposure to disaster risks can be reduced either through migration (i.e., self-protection) or through public infrastructure investment (e.g., building seawalls). Using migration data from the 1920s and 1930s, this paper studies how the population responded to disaster shocks in an era of minimal public investment. We find that, on net, young men move away from areas hit by tornados but are attracted to areas experiencing floods. Early efforts to protect against future flooding, especially during the New Deal era of the late 1930s, may have counteracted an individual migration response. * Corresponding author: [email protected]. We thank Katherine Eriksson for able research assistance and acknowledge funding from the Center for Economic History at UCLA. Participants at the November 2011 UCLA Economic History mini-conference provided useful comments. Boustan, Kahn and Rhode AEA annual meeting, Jan 2012 1 Natural disasters cause significant loss of life and property damage in the United States. In 2005, Hurricane Katrina destroyed large sections of New Orleans, resulting in the death of thousands. This salient disaster highlights that millions of people have chosen to locate in geographical areas that are at risk of natural disasters. In fact, the attraction of coastal living has encouraged more and more people to move to areas at risk from hurricanes and flooding (Rappaport and Sachs, 2003). Despite the fact that developed nations suffer less than poor countries from a disaster of a given size, natural disasters are imposing larger economic costs over time (Kahn, 2005; Pielke, Jr., et al., 2008). Many forecasters predict that climate change will only exacerbate these risks. An individual’s exposure to natural disaster risk is a function both of private choices and of governmental decisions over land use zoning and infrastructure investment. Government actions intended to protect the public can reduce the incentive to engage in private selfprotection. An intuitive example of such “crowding out,” analyzed by Kousky, Luttmer and Zeckhauser (2006), is building new sea walls in New Orleans. More people will stay in or move to a risky area if they believe that sea walls will be built. In this case, government investment can displace self-protection against risk (Peltzman, 1975). Such efforts could be disastrous if the public is overly optimistic about engineers’ ability to protect the public. In this paper, we examine one form of private self-protection, net migration away from disaster-struck areas, during the 1920s and 1930s, a period of high disaster activity taking place before the advent of coordinated federal disaster management. In this era, disaster relief was directed by the American Red Cross (ARC). We use ARC documents to compile all major natural disasters from 1920 to 1940. Floods and tornados are the two most common types of disaster events; our dataset also contains a small number of earthquakes and hurricanes. Boustan, Kahn and Rhode AEA annual meeting, Jan 2012 2 Migration activity is measured in two new panel datasets, the first following individuals from 1920 to 1930 and the second tracking location from 1935 to 1940, both using Census sources. We find that, on net, young men move away from areas hit by tornados but are attracted to areas experiencing floods. Early efforts to protect against future flooding, especially during the New Deal era of the late 1930s, may have counteracted an individual migration response. Migration away from tornado-struck areas in this era before significant government protection is consistent with Hornbeck (forthcoming), which documents out-migration from the Dust Bowl in the mid-1930s. This historical pattern is in sharp contrast with Deryugina (2011), which finds no net population change in counties struck by hurricanes in the 1980s and 1990s. Instead, affected counties receive $356 (2008 dollars) per capita in immediate disaster aid and $670 per capita in additional federal transfers, principally through unemployment insurance and income maintenance programs, over the next ten years. She speculates that these federal transfers may create moral hazard problems, “leading individuals to live in riskier places” (p. 3). The declining private response to natural disasters over the twentieth century provides support for the “crowding out” hypothesis. An unintended consequence of the growth in disaster relief and government investment in protective infrastructure may be to expose more people to risk as they choose not to leave disaster-prone areas or to move to such areas. Data on natural disasters and migration activity, 1920-40 Data on natural disasters The 1920s and 1930s witnessed numerous major natural disasters. Deadly tornadoes ravaged Missouri, Illinois and Indiana in 1925, Alabama in 1932, and Mississippi and Georgia in 1936; a 6.4-magnitude earthquake struck in a densely populated area (near Long Beach, CA) Boustan, Kahn and Rhode AEA annual meeting, Jan 2012 3 in 1933; massive flooding affected the lower Mississippi valley in 1927 and the OhioMississippi river valleys in 1937; and serious hurricanes hit Florida in 1926 and 1928 and New England and New York in 1938. Figure 1 portrays the combined damage estimates for all major disasters in the United States from 1902 to 1978. Following Pielke, Jr., et al. (2008), we use the GDP deflator to convert damage estimates into constant 2005 dollars. The real series is then “normalized” over time by comparison with real value estimates of national wealth. The year 1906, which witnessed the great San Francisco earthquake, is an obvious outlier. More importantly, three of the 10 years in which natural disasters destroyed more than 0.01 percent of national wealth occurred in one of our study periods (1935-40). Figure 1: Total Damages from Earthquakes, Tornadoes, Hurricanes, and Floods Normalized by National Wealth, 1902 to 1978 We collect data on disaster activity by county and year from a series of ARC circulars. The ARC received its first congressional charter in 1881, as a voluntary non-profit organization 1 Among the popular and academic books chronicling these disasters are Barry (1997), Egan (2006), Welky (2011), Burns (2005), and Libecap and Steckel, (2011). In addition, 1930 and 1934-36 witnessed wide spread droughts as documented in Cunfer (2005), Woodruff (1985), and Hornbeck (2011). 2 For data on floods, see U.S. Weather Bureau (1950), Table F4, pp. 75-76; and Pielke Jr., et. al, (2002); for earthquakes, see Vranes, and Pielke, Jr. (2009); for hurricanes, see Pielke Jr., et. al, (2008); and for tornadoes, see Brooks and Doswell III (2000). 0 0.0005 0.001 0.0015 0.002 0.0025 0.003 0.0035 190