Does Governmental Assistance Affect Private Decisions to Insure? An Empirical Analysis of Flood Insurance Purchases

Meri Davlasheridze and Qing Miao

Land Economics, 2019, vol. 95, issue 1, 124-145

Abstract: In this paper, we empirically examine whether the Federal Emergency Management Agency’s Public Assistance (PA) program, which targets postdisaster cleanup and infrastructure rehabilitation, affects household purchases of flood insurance. Using the fixed-effects model with instrumental variables to address the endogeneity of disaster aid, we find that increased PA grants reduce a county’s flood insurance take-up rates, thereby driving down its total insurance coverage and premiums paid. Our findings provide empirical evidence on the crowding-out effect of public disaster programs, and shed light on their implicit social costs and increased federal financial exposure to natural disasters and climate change.

JEL-codes: Q54 Q58 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.3368/le.95.1.124
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:uwp:landec:v:95:y:2019:i:1:p:124-145

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