Hurricanes, flood risk and the economic adaptation of businesses

Abstract We use administrative data containing all business establishments in New York City to analyze how businesses reacted to flooding in the context of Hurricane Sandy (October 2012). We find that flooding led to reductions in employment (of about 4%) and average wages (of about 2%) among the affected businesses. The effects were substantially larger and more persistent in some parts of the city (Brooklyn and Queens) than others (Manhattan). Heterogeneity across boroughs reflects differences in the severity of flooding, building types and industry composition. The effects of flooding also vary by industry and businesses in sectors involved in rebuilding after the storm experienced employment growth. Flooding also led to establishment closings and relocation to other neighborhoods, which is a form of adaptation to increased flood risk.