NWC REU 2004
May 24 - July 31



The Economic Impact of Tornadoes

Kim Klockow, Harold Brooks, and Dan Sutter



The purpose of this study is to uncover general trends in the consumer markets of Oklahoma communities responding to significant (damage of over $3 million) tornado events. The consumer response is measured using a time series consisting of monthly sales subject to tax data for each location included in the study. 30 tornadoes, and 65 areas in and around the immediate impact zones are studied, including counties, cities and some small towns. It is evident from this research that it is impossible to predict what a market response will be, as population data, damage data, and tornado impacts (as extrapolated from multiple regression models) never show any correlations. However, a general trend is evident, as more cases in this study show signs of consumer market growth than show decline. The ratio is 2.5:1 in a short-run period (6 months), and 1.5:1 in a long-run (2 year) period. The cases which are significant (as shown by a simple ptest) are greater for cases of market increase, in both the 6-month and long-run periods, by spreads of 10% over decreasing impact cases. The main conclusions of this study are in two parts; there is no way to predict the economic impact for general cases of tornado damage, but there is a higher probability that the impact on the consumer market will be to increase local sales activity.

Full Paper [PDF]

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