The Income Consequences of Managed Retreat

Managed retreat - the relocation of households or infrastructure out of harm’s way - is one of the most frequently recommended policies to reduce exposure to future losses from disasters. After the 2011 Christchurch earthquake in New Zealand, around 16000 people were relocated from their communities through a managed retreat program (the Residential Red Zone - RRZ). We use comprehensive, individual-level, administrative, panel data from Canterbury (2004-2018), and a difference-in-difference evaluation method to identify the effects of displacement on the RRZ population. We find that compared to their non-relocated neighbors, the RRZ population experienced a significant initial decrease in their wages and salaries, and in their total income. The impacts varied with the time spent in the re-zoned area, and the timing of their move. Wages and salaries of those who were red-zoned and moved in 2011 were reduced by 9%, and 10.4% for those who moved later (in 2012). Women faced greater decreases in wages and salaries, and total income. There were no discernible impacts of the relocation on self-employment income. In sum, we find strong evidence that the managed retreat program had identifiable adverse real effects on personal income. This finding has direct implications for the compensation packages that should be allocated in future managed retreat programs.