The effect of flood mitigation spending on flood damage: Accounting for dynamic feedback

David M. Welsch, Matthew W. Winden and David Zimmer

Ecological Economics, 2022, vol. 192, issue C

Abstract: Simple correlations and even more complicated regression-based estimators examining flood mitigation spending and flood damages counterintuitively reveal a positive relationship. This result makes accurately formulating or analyzing flood mitigation policy problematic. Using a unique longitudinal survey of U.S. counties from 1989 to 2017, this paper employs a dynamic feedback model which relaxes the “strict exogeneity” assumption in previous models, allowing flood damages to “feed back” and influence future mitigation. After accounting for feedback, the paper finds a 100% increase in mitigation spending reduces the financial consequence of flood damages by approximately 9%. The modeling approach and results can be used to perform cost-benefit analysis on public flood mitigation investment, as well as inform the efficient level of future public support.

Keywords: Natural disaster; Dynamic panel; Random effects; Government spending (search for similar items in EconPapers)
JEL-codes: C33 D61 Q54 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolec:v:192:y:2022:i:c:s0921800921003323

DOI: 10.1016/j.ecolecon.2021.107273

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