Title: Severe Hurricanes, Federal Disaster Assistance and the Economic Value of Forests: Empirical Evidence

Abstract :
Climate change has been shown to alter large disturbance events such as high severity wildfires and extreme hurricanes, which can affect the economic value of uninsured natural resources like forests through destruction of growing stocks and altered landowner expectations. Government financial assistance for disasters affecting natural resource markets has been historically limited. This paper uses an empirical difference-in-differences approach to estimate the effect of Cate- gory 5 Hurricane Michael on parcel-level timberland prices in the forest-rich southeastern U.S. Across a range of treatment definitions derived from federal data and satellite-derived canopy loss, we find that timberland parcels damaged by the Hurricane experienced substantial price declines of approximately 53 to 68 percent in a 15-month period immediately following storm arrival. A complementary quantile regression shows the average price impact is primarily driven by a large 70 percent decrease in the 0.2 quantile of the price distribution, as the storm led to a sharp spike in extremely low valued timberland sales. Timber parcels that were undamaged but a “near miss” to the Hurricane saw a smaller 38 to 48 percent decrease in prices, suggesting the storm shifted landowner expectations of storm arrival. The federal government developed multiple new financial assistance programs approximately 15 months after storm arrival, and we present evidence that those programs led to recovery of land prices on damaged parcels to a level statistically indistinguishable from pre-hurricane levels, with the recovery coinciding with the programs’ late-2019 announcement. Therefore, in this setting we show that timberland prices fully reflect hurricane damages only in the absence of government disaster assistance.