Predictors of Business Return in New Orleans after Hurricane Katrina

We analyzed the business reopening process in New Orleans after Hurricane Katrina, which hit the region on August 29, 2005, to better understand what the major predictors were and how their impacts changed through time. A telephone survey of businesses in New Orleans was conducted in October 2007, 26 months after Hurricane Katrina. The data were analyzed using a modified spatial probit regression model to evaluate the importance of each predictor variable through time. The results suggest that the two most important reopening predictors throughout all time periods were the flood depth at the business location and business size as represented by its wages in a logarithmic form. Flood depth was a significant negative predictor and had the largest marginal effects on the reopening probabilities. Smaller businesses had lower reopening probabilities than larger ones. However, the nonlinear response of business size to the reopening probability suggests that recovery aid would be most effective for smaller businesses than for larger ones. The spatial spillovers effect was a significant positive predictor but only for the first nine months. The findings show clearly that flood protection is the overarching issue for New Orleans. A flood protection plan that reduces the vulnerability and length of flooding would be the first and foremost step to mitigate the negative effects from climate-related hazards and enable speedy recovery. The findings cast doubt on the current coastal protection efforts and add to the current debate of whether coastal Louisiana will be sustainable or too costly to protect from further land loss and flooding given the threat of sea-level rise. Finally, a plan to help small businesses to return would also be an effective strategy for recovery, and the temporal window of opportunity that generates the greatest impacts would be the first 6∼9 months after the disaster.