Ulric B. and Evelyn L. Bray Social Sciences Seminar

Abstract: Private transfers provide ex-post support to victims of extreme events, but the social insurance value of these transfers depends on how closely they align with victim need. Using detailed administrative records from the American Red Cross, we study donation patterns using a heterogeneity-robust difference-in-differences estimator. Following deadly tornadoes, donations from individuals living within a 100-mile radius of the affected area are elevated for up to 15 weeks, and responses are increasing in tornado severity. We find no evidence of in-group bias, instead discovering that the response of donations from high-income donor areas is decreasing in the income of areas affected by the tornado. Nonetheless, the total dollar value of donations received is steeply increasing in the income of the affected area. This disparity arises because higher-income tornado sites are located near larger and higher-income populations and because the donation response decreases in the distance between donors and the affected area. These findings suggest a role for government redistribution to offset disparities that appear to conflict with donors' intentions, but we find essentially no redistribution in tornado-related aid provided by the Federal Emergency Management Agency.

Joint work with Benjamin M. Marx.