Young-Kyu Moh

Migration and Wages: A Natural Experiment from Hurricane Katrina

The objective of this paper is to employ the Hurricane Katrina evacuation into Houston, TX as a natural experiment to estimate the effect of large scale in-migration on regional earnings. Given the characteristics of the evacuees, their influx would have caused the supply of applicants for lower skilled jobs to increase proportionately more than for higher skilled jobs. We utilize a differences-in-differences-in-differences methodology in which we compare differences in average earnings in the low-skill, non-traded goods industries to the corresponding differences in the set of high skill industries in the Houston and Dallas-Fort Worth MSAs before and after the Katrina-induced migration. Unlike previous studies, we include a measure of the post-storm increase in demand for local goods and services on the demand for labor. We find evidence that the relative average payroll in the low-skill non-tradable goods industries in Houston decreased by .7% when compared to the relative change for the same group of industries in Dallas. Our findings also suggest that failure to account for demand-side influences following the migration results in significant under-estimation of wage effects due to the shift in labor supply.