Quantifying Long-Term Economic Impacts of Wildfires on Community-Level Economies in California

• In Event: After the Fire: Economic and Institutional Responses to Wildfires

Abstract

As wildfires grow in frequency and severity across the United States and globally, policymakers
face increasing pressure to allocate scarce resources to prevention and recovery. While existing
research has focused largely on immediate damages, less is known about how wildfires disrupt
local economic activity, the core engine of community livelihoods and fiscal stability, and how
these disruptions matter for long-term recovery. Understanding these dynamics is critical, as
changes in economic activity directly affect employment, business survival, tax revenues, and
communities' capacity to rebuild.

This study quantifies the causal impacts of major wildfire events on California county-level
economies by integrating multiple data sources and performing causal analysis. We combine
spatially explicit data on wildfire structural damage from the California Department of Forestry
and Fire Protection with detailed taxable sales data from the California Department of Tax and
Fee Administration, which serve as a high-frequency metric for local economic activity across
sectors. Additional demographic and economic controls are incorporated from the U.S. Census.
The resulting dataset captures both wildfire intensity and sector-specific changes in economic
activity over time, allowing us to track how local economies respond and adjust.
Using a synthetic control framework, we estimate causal effects for counties experiencing major

wildfire events by constructing counterfactual scenarios in which wildfires did not occur. This
approach allows us to measure how economic activity deviates from its expected trajectory due
to wildfire shocks, both at the aggregate level and across key sectors. We further examine
whether there exists a threshold of structural damage beyond which local economic activity fails to recover to pre-fire trends, indicating persistent economic damage. In addition, we analyze changes in the composition of taxable expenditures to understand how wildfire events reallocate economic activity across sectors during recovery periods, shedding light on adaptation mechanisms within affected communities.

Our findings provide new evidence on the short and long-run economic consequences of
wildfires by focusing on economic activity as the central measure of community resilience. This
perspective offers important insights for the design of wildfire mitigation investments, disaster
recovery programs, and fiscal planning, as sustained disruptions to economic activity can have
lasting implications for local governments, labor markets, and regional inequality.

Authors:Esther Mejia , Mehdi Nemati  , Matthew Sloggy  , Jose Sanchez

Author

• Esther Mejia, University of California, Riverside
  Presenting Author