Faculty of Liberal Arts, Sophia University

Graduate School of Economics and Management, Tohoku University

Hurricane Katrina devastated the state of Louisiana in 2005. Using the synthetic control method, we evaluate the effect of this disaster on income inequality in Louisiana. The fndings suggest that the disaster has an inequality-increasing impact on the income shares of the top 0.1% and top 1% of income earners in the immediate year following its occurrence. We find evidence of heterogeneous effects of the disaster among income earners on the top decile. The effect of the disaster is positive and statistically significant for the top 1% income share, but it is negative and insignificant for the income shares of the next 9%. Our empirical exercise also indicates that the effect from the first year is not persistent and evolves into a highly volatile pattern in the medium-term. We also find that Hurricane Katrina has a negligible effect on inequality in the long-term. Our results are robust to various specification checks and to the inclusion of a rich set of inequality measures.