The Economic Aftermath of Hurricane Katrina

Abstract

On August 29, 2005, Hurricane Katrina swept into Louisiana and New Orleans, a city built largely on land reclaimed from swamp, witnessed massive failures in its levees. Much of the city and its surrounding suburbs were inundated; those residents of the city who had not heeded warnings to flee the approaching storm were evacuated in its wake. In less than a week, the city's population declined from over 400,000 to near zero. Census Bureau estimates indicate that almost two years after the storm, by July 1, 2007, nearly half of these evacuees had yet to return. Will the future New Orleans bear any resemblance to the city that existed prior to Katrina? Most government authorities, from city officials to federal spokespersons, insist that New Orleans must—and should—be fully rebuilt. Many environmental scientists question whether such a rebuilding would be sensible, given the city's precarious geological position and the contribution of past land reclamation to the city's current vulnerability. The more basic positive question of whether the city will come back, however, is fundamentally an economic one. After Hurricane Katrina, will the city of New Orleans continue to be a preferred location for more than 400,000 residents and their employers? Or will the disaster shift the city to a new equilibrium level of employment and population?