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

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

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.

Suggested Citation

  • Welsch, David M. & Winden, Matthew W. & Zimmer, David M., 2022. "The effect of flood mitigation spending on flood damage: Accounting for dynamic feedback," Ecological Economics, Elsevier, vol. 192(C).
    • Handle: RePEc:eee:ecolec:v:192:y:2022:i:c:s0921800921003323
    DOI: 10.1016/j.ecolecon.2021.107273
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    More about this item

    Keywords

    Natural disaster; Dynamic panel; Random effects; Government spending;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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