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Disaster Policies


  • David E. Wildasin

    (University of Kentucky)


Although major disasters like the 2005 Gulf Coast hurricanes are infrequent, they dominate empirical loss distributions, as illustrated by a statistical analysis of flood losses in Louisiana. Extraordinary Federal emergency assistance has shifted a large portion of the burden of the 2005 floods to the rest of society, relieving financial stress in the disaster-stricken region but raising serious questions about the incentives for subnational governments to implement costly but efficient disaster avoidance policies in the future. The Federal government cannot credibly commit not to insure losses from future disasters, nor can it efficiently assume responsibility for land use, economic development, and other state and local government policies that affect disaster risk. Mandatory disaster reserves provide an alternative policy option through which actuarially fair Federal insurance could credibly strengthen the incentives for efficient subnational government disaster policies.

Suggested Citation

  • David E. Wildasin, 2008. "Disaster Policies," Public Finance Review, , vol. 36(4), pages 497-518, July.
  • Handle: RePEc:sae:pubfin:v:36:y:2008:i:4:p:497-518

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    References listed on IDEAS

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    Cited by:

    1. Gilberto Turati & Luigi Buzzacchi, 2009. "Optimal risk allocation in the provision of local public services: can a private insurer be better than a public mutual fund?," Working Papers 2009/21, Institut d'Economia de Barcelona (IEB).
    2. Timothy Goodspeed & Andrew Haughwout, 2012. "On the optimal design of disaster insurance in a federation," Economics of Governance, Springer, vol. 13(1), pages 1-27, March.
    3. Mark Skidmore & Hideki Toya, 2013. "Natural Disaster Impacts and Fiscal Decentralization," Land Economics, University of Wisconsin Press, vol. 89(1), pages 101-117.


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