Disaster-induced migration and local labor markets: Heterogeneous effects by skill level and industry structure

Natural disasters can trigger large-scale population displacement, resulting in labor market shocks in destination areas. Nonetheless, important aspects of migration-driven shocks remain unclear, particularly how relative inflow intensity, the spatially concentrated inflow of low-skilled migrants, and industry structure moderate these impacts. Using Hurricane Katrina as a natural experiment and a Difference in Difference framework, this study reveals that displacement shock reduces wages in the low-skill localized sector, but this negative impact is heavily characterized by non-linear congestion effects, intensifying sharply from $-0.15 to $-0.27 drop in wage rates when the inflow concentration crosses certain threshold. Decomposing the demand-side channels shows that while the influx stimulates local business creation, this countervailing buffer is economically modest and insufficient to offset the supply-driven wage depression. Furthermore, sectoral mobility and joint wage-setting analyses confirm that low-skill localized and traded industries remain highly segmented in the short run. These findings highlight the importance of accounting for both supply and demand channels, non-linear thresholds, and sectoral frictions to improve regional labor market policies after demographic shocks.

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Journal
PLoS ONE
Published
2026-10-27
DOI
https://doi.org/10.1371/journal.pone.0346313
Primary Topic
Migration and Labor Dynamics
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article
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article

Disaster-induced migration and local labor markets: Heterogeneous effects by skill level and industry structure

Harvey Cutler, Yuchen Hu, Qiaoyan Luo, Yihua Mao
PLoS ONE
Migration and Labor Dynamics
article

Disaster-induced migration and local labor markets: Heterogeneous effects by skill level and industry structure

Harvey Cutler, Yuchen Hu, Qiaoyan Luo, Yihua Mao
article en

Abstract

Natural disasters can trigger large-scale population displacement, resulting in labor market shocks in destination areas. Nonetheless, important aspects of migration-driven shocks remain unclear, particularly how relative inflow intensity, the spatially concentrated inflow of low-skilled migrants, and industry structure moderate these impacts. Using Hurricane Katrina as a natural experiment and a Difference in Difference framework, this study reveals that displacement shock reduces wages in the low-skill localized sector, but this negative impact is heavily characterized by non-linear congestion effects, intensifying sharply from $-0.15 to $-0.27 drop in wage rates when the inflow concentration crosses certain threshold. Decomposing the demand-side channels shows that while the influx stimulates local business creation, this countervailing buffer is economically modest and insufficient to offset the supply-driven wage depression. Furthermore, sectoral mobility and joint wage-setting analyses confirm that low-skill localized and traded industries remain highly segmented in the short run. These findings highlight the importance of accounting for both supply and demand channels, non-linear thresholds, and sectoral frictions to improve regional labor market policies after demographic shocks.

PLoS ONEVol. 21(10)
Wuxi University (CN), Zhejiang University (CN), Colorado State University (US)
Decent work and economic growth, Reduced inequalities, No poverty
Openalex Percentile: Top 6%
Migration and Labor Dynamics
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Disaster-induced migration and local labor markets: Heterogeneous effects by skill level and industry structure — Harvey Cutler, Yuchen Hu, et al. · PLoS ONE (2026) | TGRS Research Map | TGRS