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Flood Risk Mapping and the Distributional Impacts of Climate Information

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Abstract

This paper examines the provision of official flood risk information in the United States and its distributional impacts on residential flood insurance take-up. Assembling new data on all flood maps produced after Hurricane Katrina, I first document that updated maps decreased the number of properties zoned in high-risk floodplains and incorrectly omitted five million properties that should have been rezoned inside these areas. Removals and omissions disproportionately occurred in neighborhoods with more Black and Hispanic residents. Leveraging the staggered timing of map updates, I estimate they decreased flood insurance take-up and exacerbated racial disparities in insurance coverage. These effects are driven by beliefs about risks and regulatory constraints. Correcting flood maps could increase welfare by $20 billion annually, but past updates decreased welfare due to distorted risk and price signals.

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  • Joakim A. Weill, 2023. "Flood Risk Mapping and the Distributional Impacts of Climate Information," Finance and Economics Discussion Series 2023-066, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2023-66
    DOI: 10.17016/FEDS.2023.066
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    More about this item

    Keywords

    Applied Econometrics; Climate Adaptation; Disaster Insurance; Environmental Inequalities; Flood Risk; Information Provision;
    All these keywords.

    JEL classification:

    • G52 - Financial Economics - - Household Finance - - - Insurance
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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