Effects of Public Compensation for Disaster Damages on Private Insurance and Forest Management Decisions
Politicians have a tendency to compensate victims of natural disasters. This article explores the impact of such public relief programmes on a non-industrial private forest owner’s insurance expenditures or on forest management activities. We develop a theoretical model of insurance demand or forest management activities in a risky context with a finite number of states of nature and a loss proportional to the forest value. The model predicts the optimal private expenditures of insurance and forest management activities. The comparative static effects of variations in the level of insurance price, attitudes toward risk, stand value, and the magnitude and frequency of the public compensation on insurance expenditures and on forest management activities are also characterised, and their implications for government policies are examined. Providing public financial assistance after a natural catastrophe may reduce the incentives of nonindustrial private forest owners to invest in insurance and protective measures prior to a disaster.
|Date of creation:||Oct 2007|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 33 (0)3 83 39 68 66
Fax: 33 (0)3 83 37 06 45
Web page: http://www.nancy.inra.fr/lef
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Philip Ganderton & David Brookshire & Michael McKee & Steve Stewart & Hale Thurston, 2000. "Buying Insurance for Disaster-Type Risks: Experimental Evidence," Journal of Risk and Uncertainty, Springer, vol. 20(3), pages 271-289, May.
- Ehrlich, Isaac & Becker, Gary S, 1972. "Market Insurance, Self-Insurance, and Self-Protection," Journal of Political Economy, University of Chicago Press, vol. 80(4), pages 623-48, July-Aug..
- Howard Kunreuther & Mark Pauly, 2006. "Rules Rather Than Discretion: Lessons from Hurricane Katrina," NBER Working Papers 12503, National Bureau of Economic Research, Inc.
- Dionne, G. & Eeckhoudt, L., 1984.
"Self-Insurance, Self-Protection and Increased Risk Aversion,"
Cahiers de recherche
8424, Universite de Montreal, Departement de sciences economiques.
- Dionne, Georges & Eeckhoudt, Louis, 1985. "Self-insurance, self-protection and increased risk aversion," Economics Letters, Elsevier, vol. 17(1-2), pages 39-42.
- DIONNE, George & EECKHOUDT, Louis, . "Self-insurance, self-protection and increased risk aversion," CORE Discussion Papers RP -623, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Kaplow, Louis, 1991.
" Incentives and Government Relief for Risk,"
Journal of Risk and Uncertainty,
Springer, vol. 4(2), pages 167-75, April.
- Ganderton, Philip T, et al, 2000. " Buying Insurance for Disaster-Type Risks: Experimental Evidence," Journal of Risk and Uncertainty, Springer, vol. 20(3), pages 271-89, May.
- Lewis, Tracy & Nickerson, David, 1989. "Self-insurance against natural disasters," Journal of Environmental Economics and Management, Elsevier, vol. 16(3), pages 209-223, May.
- Howard Kunreuther & Mark Pauly, 2004. "Neglecting Disaster: Why Don't People Insure Against Large Losses?," Journal of Risk and Uncertainty, Springer, vol. 28(1), pages 5-21, January.
- Bum J. Kim & Harris Schlesinger, 2004.
"Adverse Selection in an Insurance Market with Government-Guaranteed Subsistence Levels,"
CESifo Working Paper Series
1217, CESifo Group Munich.
- Bum J. Kim & Harris Schlesinger, 2005. "Adverse Selection in an Insurance Market With Government-Guaranteed Subsistence Levels," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 72(1), pages 61-75.
- Browne, Mark J & Hoyt, Robert E, 2000. " The Demand for Flood Insurance: Empirical Evidence," Journal of Risk and Uncertainty, Springer, vol. 20(3), pages 291-306, May.
- Kent Smetters, 2005. "Insuring Against Terrorism: The Policy Challenge," NBER Working Papers 11038, National Bureau of Economic Research, Inc.
- McClelland, Gary H & Schulze, William D & Coursey, Don L, 1993. " Insurance for Low-Probability Hazards: A Bimodal Response to Unlikely Events," Journal of Risk and Uncertainty, Springer, vol. 7(1), pages 95-116, August.
- Howard Kunreuther & Mark Pauly, 2006. "Rules rather than discretion: Lessons from Hurricane Katrina," Journal of Risk and Uncertainty, Springer, vol. 33(1), pages 101-116, September.
- Holecy, Jan & Hanewinkel, Marc, 2006. "A forest management risk insurance model and its application to coniferous stands in southwest Germany," Forest Policy and Economics, Elsevier, vol. 8(2), pages 161-174, March.
When requesting a correction, please mention this item's handle: RePEc:lef:wpaper:2007-06. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Benoit Vandenbroucke)The email address of this maintainer does not seem to be valid anymore. Please ask Benoit Vandenbroucke to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.