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

Does Governmental Assistance Affect Private Decisions to Insure? An Empirical Analysis of Flood... <p>ABSTRACT:</p><p>In this paper, we empirically examine whether the Federal Emergency Management Agency&apos;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&apos;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. (<i>JEL Q54, Q58</i>)</p> http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Land Economics University of Wisconsin Press

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

Land Economics , Volume 95 (1) – Jan 11, 2019

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Publisher
University of Wisconsin Press
Copyright
Copyright by the Board of Regents of the University of Wisconsin System.
ISSN
1543-8325

Abstract

<p>ABSTRACT:</p><p>In this paper, we empirically examine whether the Federal Emergency Management Agency&apos;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&apos;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. (<i>JEL Q54, Q58</i>)</p>

Journal

Land EconomicsUniversity of Wisconsin Press

Published: Jan 11, 2019

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