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Uncertainty of Governmental Relief and the Crowding out of Flood Insurance

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  • Paul Raschky
  • Reimund Schwarze
  • Manijeh Schwindt
  • Ferdinand Zahn

Abstract

This paper discusses the problem of crowding out of insurance by co-existing governmental relief programs—the so-called ‘charity hazard’—in the context of different institutional schemes of governmental disaster relief in Austria and Germany. We test empirically whether an assured partial relief scheme (as in Austria) drives a stronger crowding out of private insurance than a scheme promising full relief which is subject to ad-hoc political decision making (as in Germany). Our general finding is that the institutional design of governmental relief programs significantly affects the demand for private natural hazard insurance. Copyright Springer Science+Business Media B.V. 2013

Suggested Citation

  • Paul Raschky & Reimund Schwarze & Manijeh Schwindt & Ferdinand Zahn, 2013. "Uncertainty of Governmental Relief and the Crowding out of Flood Insurance," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 54(2), pages 179-200, February.
    • Handle: RePEc:kap:enreec:v:54:y:2013:i:2:p:179-200
    DOI: 10.1007/s10640-012-9586-y
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    More about this item

    Keywords

    Insurance demand; Governmental relief; Natural hazards; D78; D81; G22; Q54;
    All these keywords.

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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