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Floods, flood policies and changes in welfare and inequality: Evidence from Germany

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  • Tovar Reaños, Miguel A.

Abstract

Floods in Germany have caused significant economic damage and are expected to become more frequent. The economic damage expected as a result of floods will affect households differently across income levels. A method, rooted in economic theory, is proposed to estimate changes in household welfare and income inequality resulting from expected flood damage. It is found that welfare losses after floods disproportionately harm low income households and increase inequality by 0.14%. Families with dependent children and householders of retirement age in the lowest income quartile are the most affected. In order to collect additional resources to cover the cost of the financial relief, the of additional income, real estate and energy taxes are investigated. These instruments yield a reduction in income inequality. It is also shown that rewarding investment in mitigation and insurance, and supporting low income households can be jointly achieved when re-allocating additional energy-tax revenues.

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  • Tovar Reaños, Miguel A., 2021. "Floods, flood policies and changes in welfare and inequality: Evidence from Germany," Ecological Economics, Elsevier, vol. 180(C).
    • Handle: RePEc:eee:ecolec:v:180:y:2021:i:c:s0921800919317136
    DOI: 10.1016/j.ecolecon.2020.106879
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    2. Odersky, Moritz & Löffler, Max, 2023. "The Distributional Impact of Global Warming: Evidence from the 2021 Floods in Germany," VfS Annual Conference 2023 (Regensburg): Growth and the "sociale Frage" 277684, Verein für Socialpolitik / German Economic Association.
    3. Maike Beier & Jessica Gerstendörfer & Katja Mendzigall & Dirk Pavlik & Peter Trute & Robert von Tils, 2022. "Climate Impact and Model Approaches of Blue-Green Infrastructure Measures for Neighborhood Planning," Sustainability, MDPI, vol. 14(11), pages 1-31, June.

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    More about this item

    Keywords

    Distributional effects; Microsimulation; Flood risk; Government policy;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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