The Price of Disaster: Estimating the Impact of Hurricane Harvey on the Texas Construction Labor Market

Abstract: This paper estimates the effect of Hurricane Harvey on wages and employment in the construction labor industry across impacted counties in Texas. Based on data from the Quarterly Census of Employment and Wages (QCEW) for the period 2016-2019, I adopted a difference-in-differences event study approach by comparing results in 41 FEMA-designated disaster counties with a set of unaffected southern control counties. I find that Hurricane Harvey had a large and long-lasting impact on labor market outcomes in the construction industry. More precisely, average log wages in treated counties rose by around 7.2 percent compared to control counties two quarters after the hurricane and remained high for the next two years. Employment effects were more gradual, showing a statistically significant increase only after six quarters, in line with the lagged nature of large-scale reconstruction activities. These results imply that natural disasters can generate persistent labor demand shocks to local construction markets, with policy implications for disaster recovery planning and workforce mobilization.