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Disaster Policies

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  • David E. Wildasin

    (University of Kentucky)

Abstract

Although major disasters like the 2005 Gulf Coast hurricanes are infrequent, they dominate empirical loss distributions, as illustrated by a statistical analysis of flood losses in Louisiana. Extraordinary Federal emergency assistance has shifted a large portion of the burden of the 2005 floods to the rest of society, relieving financial stress in the disaster-stricken region but raising serious questions about the incentives for subnational governments to implement costly but efficient disaster avoidance policies in the future. The Federal government cannot credibly commit not to insure losses from future disasters, nor can it efficiently assume responsibility for land use, economic development, and other state and local government policies that affect disaster risk. Mandatory disaster reserves provide an alternative policy option through which actuarially fair Federal insurance could credibly strengthen the incentives for efficient subnational government disaster policies.

Suggested Citation

  • David E. Wildasin, 2008. "Disaster Policies," Public Finance Review, , vol. 36(4), pages 497-518, July.
    • Handle: RePEc:sae:pubfin:v:36:y:2008:i:4:p:497-518
    DOI: 10.1177/1091142107306286
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    References listed on IDEAS

    as
    1. Wildasin, David E., 2002. "Local Public Finance in the Aftermath of September 11," Journal of Urban Economics, Elsevier, vol. 51(2), pages 225-237, March.
    2. Emilio Espino, 2005. "Should Intergovernmental Transfers Provide Insurance to the States?," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 161(1), pages 103-125, March.
    3. Varian, Hal R., 1980. "Redistributive taxation as social insurance," Journal of Public Economics, Elsevier, vol. 14(1), pages 49-68, August.
    4. Caplan, Arthur J. & Cornes, Richard C. & Silva, Emilson C. D., 2000. "Pure public goods and income redistribution in a federation with decentralized leadership and imperfect labor mobility," Journal of Public Economics, Elsevier, vol. 77(2), pages 265-284, August.
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    Cited by:

    1. Gilberto Turati & Luigi Buzzacchi, 2009. "Optimal risk allocation in the provision of local public services: can a private insurer be better than a public mutual fund?," Working Papers 2009/21, Institut d'Economia de Barcelona (IEB).
    2. Hideki Toya & Mark Skidmore, 2010. "Natural Disaster Impacts and Fiscal Decentralization," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 11(2), pages 43-55, July.
    3. Timothy Goodspeed & Andrew Haughwout, 2012. "On the optimal design of disaster insurance in a federation," Economics of Governance, Springer, vol. 13(1), pages 1-27, March.
    4. Timothy Goodspeed & Andrew Haughwout, 2012. "On the optimal design of disaster insurance in a federation," Economics of Governance, Springer, vol. 13(1), pages 1-27, March.

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