IDEAS home Printed from https://ideas.repec.org/a/spr/ediscc/v3y2019i3d10.1007_s41885-019-00043-1.html
   My bibliography  Save this article

Regressivity in Public Natural Hazard Insurance: a Quantitative Analysis of the New Zealand Case

Author

Listed:
  • Sally Owen

    (Motu Economic and Public Policy Research)

  • Ilan Noy

    (Victoria University of Wellington)

Abstract

Natural hazard insurance is almost always provided by the public sector (directly, or indirectly through public-private partnerships). Given this dominant role of the public sector in hazard insurance, and the importance of shocks in economic dynamics, it is surprising that equity issues have not faced more scrutiny with respect to the design of hazard insurance. The nature of the regressivity we quantify has not been previously identified. We provide a detailed quantification of the degree of regressivity of the New Zealand earthquake insurance program – a system that was designed with an egalitarian purpose. We measure this regressivity as it manifested in the half a million insurance claims that resulted from the Canterbury earthquakes of 2011. We suggest how this regressivity can be remedied with modifications to the programs’ structure, and point to how other insurance schemes internationally are likely to also be regressive.

Suggested Citation

  • Sally Owen & Ilan Noy, 2019. "Regressivity in Public Natural Hazard Insurance: a Quantitative Analysis of the New Zealand Case," Economics of Disasters and Climate Change, Springer, vol. 3(3), pages 235-255, October.
    • Handle: RePEc:spr:ediscc:v:3:y:2019:i:3:d:10.1007_s41885-019-00043-1
    DOI: 10.1007/s41885-019-00043-1
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s41885-019-00043-1
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s41885-019-00043-1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Lucas W. Davis & Christopher R. Knittel, 2019. "Are Fuel Economy Standards Regressive?," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(S1), pages 37-63.
    2. William R. Johnson, 2006. "Are Public Subsidies to Higher Education Regressive?," Education Finance and Policy, MIT Press, vol. 1(3), pages 288-315, June.
    3. Sally Owen & Ilan Noy, 2017. "The Unfortunate Regressivity of Public Natural Hazard Insurance: A Quantitative Analysis of a New Zealand Case," CESifo Working Paper Series 6540, CESifo.
    4. Antonio M. Bento & Lawrence H. Goulder & Mark R. Jacobsen & Roger H. von Haefen, 2009. "Distributional and Efficiency Impacts of Increased US Gasoline Taxes," American Economic Review, American Economic Association, vol. 99(3), pages 667-699, June.
    5. Kakwani, Nanok C, 1977. "Measurement of Tax Progressivity: An International Comparison," Economic Journal, Royal Economic Society, vol. 87(345), pages 71-80, March.
    6. Howard Kunreuther, 2015. "The Role of Insurance in Reducing Losses from Extreme Events: The Need for Public–Private Partnerships†," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 40(4), pages 741-762, October.
    7. A. Colin Cameron & Douglas L. Miller, 2015. "A Practitioner’s Guide to Cluster-Robust Inference," Journal of Human Resources, University of Wisconsin Press, vol. 50(2), pages 317-372.
    8. Sally Owen & Ilan Noy, 2017. "The Unfortunate Regressivity of Public Natural Hazard Insurance: A Quantitative Analysis of a New Zealand Case," CESifo Working Paper Series 6540, CESifo.
    9. Pim Borren & Matthew Sutton, 1992. "Are increases in cigarette taxation regressive?," Health Economics, John Wiley & Sons, Ltd., vol. 1(4), pages 245-253, December.
    10. Lyon, Andrew B & Schwab, Robert M, 1995. "Consumption Taxes in a Life-Cycle Framework: Are Sin Taxes Regressive?," The Review of Economics and Statistics, MIT Press, vol. 77(3), pages 389-406, August.
    11. Richard E. Slitor, 1948. "The Measurement of Progressivity and Built-In Flexibility," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 62(2), pages 309-313.
    12. Carolyn Kousky, 2011. "Managing Natural Catastrophe Risk: State Insurance Programs in the United States," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 5(1), pages 153-171, Winter.
    13. R. A. Musgrave & Tun Thin, 1948. "Income Tax Progression, 1929-48," Journal of Political Economy, University of Chicago Press, vol. 56(6), pages 498-498.
    14. Wier, Mette & Birr-Pedersen, Katja & Jacobsen, Henrik Klinge & Klok, Jacob, 2005. "Are CO2 taxes regressive? Evidence from the Danish experience," Ecological Economics, Elsevier, vol. 52(2), pages 239-251, January.
    15. Matthew E. Kahn & V. Kerry Smith, 2017. "The Affordability Goal and Prices in the National Flood Insurance Program," NBER Working Papers 24120, National Bureau of Economic Research, Inc.
    16. Azreen Karim & Ilan Noy, 2016. "Poverty and Natural Disasters: A Meta-Regression Analysis," Review of Economics and Institutions, Università di Perugia, vol. 7(2).
    17. Marshall, Daniel, 2017. "The California Earthquake Authority," RFF Working Paper Series dp-17-05, Resources for the Future.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Orkideh Gharehgozli & Peyman Nayebvali & Amir Gharehgozli & Zaman Zamanian, 2020. "Impact of COVID-19 on the Economic Output of the US Outbreak’s Epicenter," Economics of Disasters and Climate Change, Springer, vol. 4(3), pages 561-573, October.
    2. Kevin T. Smiley & Ilan Noy & Michael F. Wehner & Dave Frame & Christopher C. Sampson & Oliver E. J. Wing, 2022. "Social inequalities in climate change-attributed impacts of Hurricane Harvey," Nature Communications, Nature, vol. 13(1), pages 1-10, December.
    3. Stéphane Hallegatte & Adrien Vogt-Schilb & Julie Rozenberg & Mook Bangalore & Chloé Beaudet, 2020. "From Poverty to Disaster and Back: a Review of the Literature," Economics of Disasters and Climate Change, Springer, vol. 4(1), pages 223-247, April.
    4. Owen Sally & Noy Ilan & Pástor-Paz Jacob & Fleming David, 2021. "Measuring the Impact of Insurance on Recovery after Extreme Weather Events Using Nightlights," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 15(2), pages 169-199, July.
    5. Cuong Nguyen & Ilan Noy & Dag Einar Sommervoll & Fang Yao, 2020. "Redrawing of a Housing Market: Insurance Payouts and Housing Market Recovery in the Wake of the Christchurch Earthquake of 2011," CESifo Working Paper Series 8560, CESifo.
    6. Jacob Pastor-Paz & Ilan Noy & Isabelle Sin & Abha Sood & David Fleming-Munoz & Sally Owen, 2020. "Projecting the effect of climate change-induced increases in extreme rainfall on residential property damages: A case study from New Zealand," Working Papers 20_02, Motu Economic and Public Policy Research.
    7. Cuong Nguyen & Ilan Noy & Dag Einar Sommervoll & Fang Yao, 2023. "Settling insurance claims with cash or repair and housing market recovery after an earthquake," Economics of Disasters and Climate Change, Springer, vol. 7(1), pages 117-134, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Owen, Sally Margaret Frean, 2017. "The unfortunate regressivity of public natural disaster insurance: Quantifying distributional implications of EQC building cover for New Zealand," Working Paper Series 6720, Victoria University of Wellington, School of Economics and Finance.
    2. Owen, Sally & Noy, Ilan, 2017. "The unfortunate regressivity of public natural hazard insurance: A quantitative analysis of a New Zealand case," Working Paper Series 20247, Victoria University of Wellington, School of Economics and Finance.
    3. Sally Owen & Ilan Noy, 2017. "The Unfortunate Regressivity of Public Natural Hazard Insurance: A Quantitative Analysis of a New Zealand Case," CESifo Working Paper Series 6540, CESifo.
    4. Dissou, Yazid & Siddiqui, Muhammad Shahid, 2014. "Can carbon taxes be progressive?," Energy Economics, Elsevier, vol. 42(C), pages 88-100.
    5. Momi Dahan, 2023. "Social Construction And The Progressivity Of Local Tax Relief," Israel Economic Review, Bank of Israel, vol. 21(1), pages 1-33, March.
    6. Magda WISNIEWSKA-KUZMA, 2020. "Measurement of personal income tax progressivity in the post-socialist countries of Europe compared to other OECD countries," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 11, pages 113-131, December.
    7. Checherita-Westphal, Cristina & Attinasi, Maria Grazia & Rieth, Malte, 2011. "Labour tax progressivity and output volatility: evidence from OECD countries," Working Paper Series 1380, European Central Bank.
    8. Rausch, Sebastian & Metcalf, Gilbert E. & Reilly, John M., 2011. "Distributional impacts of carbon pricing: A general equilibrium approach with micro-data for households," Energy Economics, Elsevier, vol. 33(S1), pages 20-33.
    9. Nils Ohlendorf & Michael Jakob & Jan Christoph Minx & Carsten Schröder & Jan Christoph Steckel, 2018. "Distributional Impacts of Climate Mitigation Policies - a Meta-Analysis," Discussion Papers of DIW Berlin 1776, DIW Berlin, German Institute for Economic Research.
    10. Moritz A. Drupp & Ulrike Kornek & Jasper N. Meya & Lutz Sager, 2021. "Inequality and the Environment: The Economics of a Two-Headed Hydra," CESifo Working Paper Series 9447, CESifo.
    11. Chung Tran & Nabeeh Zakariyya, 2019. "Tax Progressivity in Australia: Facts, Measurements and Estimates," ANU Working Papers in Economics and Econometrics 2019-667, Australian National University, College of Business and Economics, School of Economics.
    12. Qin, Ping. & Chen, Peilin. & Zhang, Xiao-Bing. & Xie, Lunyu., 2020. "Coal taxation reform in China and its distributional effects on residential consumers," Energy Policy, Elsevier, vol. 139(C).
    13. Jacobs, Leif & Quack, Lara & Mechtel, Mario, 2022. "Distributional effects of carbon pricing by transport fuel taxation," Energy Economics, Elsevier, vol. 114(C).
    14. Junyi Zhu, 2014. "Bracket Creep Revisited - with and without r > g: Evidence from Germany," Journal of Income Distribution, Ad libros publications inc., vol. 23(3), pages 106-158, November.
    15. Bhardwaj, Chandan & Axsen, Jonn & Kern, Florian & McCollum, David, 2020. "Why have multiple climate policies for light-duty vehicles? Policy mix rationales, interactions and research gaps," Transportation Research Part A: Policy and Practice, Elsevier, vol. 135(C), pages 309-326.
    16. Onrubia Fernández, Jorge & Picos, Fidel & Rodado, María del Carmen, 2019. "Shifting tax burden to top income earners: What is the best way to reduce inequality?," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 13, pages 1-31.
    17. Chakravarty, Satya R. & Sarkar, Palash, 2022. "A synthesis of local and effective tax progressivity measurement," MPRA Paper 115180, University Library of Munich, Germany.
    18. Douenne, Thomas & Fabre, Adrien, 2020. "French attitudes on climate change, carbon taxation and other climate policies," Ecological Economics, Elsevier, vol. 169(C).
    19. Nolan, Matt, 2018. "Horizontal and Vertical Equity in the New Zealand Tax-Transfer System: 1988-2013," Working Paper Series 7657, Victoria University of Wellington, Chair in Public Finance.
    20. Katie M. Jajtner & Sophie Mitra & Christine Fountain & Austin Nichols, 2020. "Rising Income Inequality Through a Disability Lens: Trends in the United States 1981–2018," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 151(1), pages 81-114, August.

    More about this item

    Keywords

    Earthquake; Tax regressivity; Insurance;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:ediscc:v:3:y:2019:i:3:d:10.1007_s41885-019-00043-1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.