Do Floods Have Permanent Effects? Evidence From the Netherlands

Abstract

This study investigates the short‐ and long‐run impact on population dynamics of the major flood in the Netherlands in 1953. A dynamic difference‐in‐differences analysis reveals that the flood had an immediate negative impact on population growth, but limited long‐term effects. In contrast, the resulting flood protection program (Deltaworks), had a persisting positive effect on population growth. As a result, there has been an increase in population in flood‐prone areas. Our results suggest a moral hazard effect of flood mitigation leading to more people locating in flood‐prone areas, increasing potential disaster costs.

Natural disasters, economic growth and spatial spillovers: Evidence from a flash flood in Brazil

“…Regarding the direct effects of the 2008 Santa Catarina flash flood on GDP, we start with a standard municipal‐level fixed‐effects model that calculates the difference between the GDP before and after the flash flood for treated and untreated municipalities. This strategy, widely used in all areas of empirical economics, has recently been used to measure the economic impact of unanticipated natural disasters on a regional perspective by Husby et al () and Tanaka (). Our basic specification is given by the following equation: where y i t is the log of GDP per capita of municipality i at year t , F l o o d i 2008 is a dummy variable that assumes the value of 1 if municipality i was affected by the natural disaster in 2008 and 0 otherwise, and F l o o d i k , where k > 2008, are dummy variables representing treatment effects for k years after 2008.…”

“…In this paper we use a flash flood that occurred in the Brazilian state of Santa Catarina in 2008 to investigate the existence of spatial spillovers from natural disasters in geographically‐linked areas. For that, we compare the GDP trajectory of municipalities affected by the flash flood to the trajectory of municipalities not affected by the flood in the years immediately before and after the occurrence of the disaster using a difference‐in‐differences model that explicitly considers temporal effects (Autor, 2003; Husby, Groot, Hofkes, & Dröes, ) and allows for the existence of spatial interactions within affected and unaffected regions (along the lines of Delgado & Florax, ). While the literature analysing the economic effects caused by natural disasters recognizes the importance of spatial interactions, previous studies are not grounded on econometric strategies to assert reliable estimates on the true effect of natural hazards (Klomp, ; Naqvi, ; Okuyama & Chang, ).…”

Increasing flood exposure in the Netherlands: implications for risk financing

“…In Austria for example, asset growth in floodprone areas has been slower than in areas not prone to flooding (Cammerer and Thieken, 2013). A possible explanation could be that the higher flood protection standards, and thus lower flood probabilities, in the Netherlands have resulted in a stronger sense of safety and thus relatively more development in flood-prone areas (the so-called "levee effect", see Di Baldassarre et al, 2009;Lane et al, 2011;Husby et al, 2014). The largest relative increase in the number of exposed properties between 1960 and 2012 is found in protected flood-prone zones (326 %), whilst the increase in non-floodprone areas over the same period is only 193 % (albeit from a higher baseline).…”

“…Barredo, 2009) and national (e.g. Husby et al, 2014) scales, which find that the growth of population and assets in flood-prone areas can often be higher than average national growth. This trend is likely to be caused by the water-side location of many important cities, which generally see a stronger growth than rural areas as countries become more urbanised.…”

What if Dutch investors started worrying about flood risk? Implications for disaster risk reduction

“…Traditionally, the Dutch government has responded to the threat of water through a tax-payer funded system of extremely high safety standards combined with a public ex-post compensation scheme (Aerts and Botzen 2011). However, the traditional approach has not led to a decrease in exposure (Husby et al 2014). For example, due to the rapid economic growth in the economically important Randstad region, a major flood event here would have major economic consequences for the country as a whole (Bouwer and Vellinga 2007).…”