Empirical Evidence Based on Disaster-induced Rerouting of International Trade

While impact studies of port infrastructure investments are common, effects of changes in their utilisation are much less understood. Leveraging the exogenous variation in shifting trade routes due to Hurricane Katrina, I estimate port utilisation effects on otherwise unaffected Florida port communities. The instrumental variable approach embedded in a system of theoretically motivated estimation equations provides sound identification of the urban economic impact of international cargo shipments, and suggests a 10 per cent increase in seaport services raises factor prices and employment by 0.46-0.69 per cent. Aligning with the theory, effects are driven by transportation and traded goods-producing sectors.