Prevention and Insurance in Cities Exposed to Natural Disaster Risks

Arnaud Goussebaïle

Annals of Economics and Statistics, 2020, issue 139, 61-86

Abstract: Prevention and insurance are studied in an urban model with spatial heterogeneity due not only to commuting transport costs but also to natural disaster risks. Costly insurance and charity donation both lead to low insurance purchase. While the former leads to high prevention, the latter leads to low prevention. In the presence of charity, implementing insurance or building resilience subsidies may lead to even less prevention through higher development of risky areas. In all events, a public insurance policy with actuarially fair rates accounting for resilience investment and with full coverage requirements, along with lump-sum transfers, leads to Pareto improvement.

Keywords: Natural Disaster; Urbanization; Resilience; Insurance; Charity (search for similar items in EconPapers)
JEL-codes: G22 G28 Q54 R11 R58 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:2020:i:139:p:61-86

DOI: 10.15609/annaeconstat2009.139.0061

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