Natural and Industrial Disasters : Land Use and Insurance
Urbanization in exposed areas increases the cost of disasters. For industrial risks, potential victims raise ﬁrms’ liabilities. For natural risks, overexposure by some undermines mutualization. Land use policy (particularly exclusion zones) and insurance shape urbanization, but their efficiency is limited by hazard-map precision. Map-based discrimination being politically sensitive, we identify an operation of map redrawing that increases the welfare of all. Climate change and population growth increase risk. We exhibit realistic cases where exclusion zones shrink as risk rises. We disentangle the competing eﬀects at play. Results are established for alternative distributions of bargaining power between households, mayor and ﬁrm.
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