Efficiency and Equity in Urban Flood Management Policies
Flood exposure is likely to increase in the future as a direct consequence of more frequent and more intense flooding and the growth of populations and economic assets in flood-prone areas. Low-income households, which are more likely to be located in high-risk zones, will be particularly affected. This paper assesses the welfare and equity impacts of three flood management policies—risk-based insurance, zoning, and subsidized insurance—using an urban economics framework with two income groups and three potential flood locations. The paper shows that in a first-best setting, risk-based insurance maximizes social welfare. However, depending on flood characteristics, implementing a zoning policy or subsidized insurance is close to optimal and can be more feasible. Subsidizing insurance reduces upward pressure on housing rents but increases flood damage, and is recommended for rare floods occurring in a large part of a city. Zoning policies have the opposite effect, avoiding damage but increasing housing rents, and are recommended for frequent floods in small areas. The social welfare impact of choosing the wrong flood management policy depends on the location of floods relative to employment centers, with flooding close to employment centers being particularly harmful. Implementing flood management policies redistributes flood costs between high- and low-income households through land markets, irrespective of who is directly affected. As such, they are progressive in terms of equity, compared to a laissez-faire scenario with myopic anticipations, in the more common scenario where poorer populations are more exposed to urban floods. But their impacts on inequality depend on flood locations and urban configuration. For instance, in a city where floods are centrally located and low-income households live in the city center, subsidized insurance would mitigate a surge in inequality, whereas a zoning policy could substantially increase inequalities.
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Format: | Working Paper biblioteca |
Language: | English English |
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World Bank, Washington, DC
2023-02-13T21:13:16Z
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Subjects: | DISASTER RISK MANAGEMENT, URBAN FLOODS, URBAN ECONOMICS, LAND USE ZONING, SUBSIDIZED INSURANCE, RISK-BASED INSURANCE, WELFARE, INEQUALITY, CLIMATE CHANGE, |
Online Access: | http://documents.worldbank.org/curated/en/099527102062332327/IDU0e0eee23a036c7040f20898009edeafa81b36 http://hdl.handle.net/10986/39409 |
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dig-okr-10986394092023-11-14T21:49:19Z Efficiency and Equity in Urban Flood Management Policies A Systematic Urban Economics Exploration Liotta, Charlotte Avner, Paolo Hallegatte, Stéphane Avner, Paolo DISASTER RISK MANAGEMENT URBAN FLOODS URBAN ECONOMICS LAND USE ZONING SUBSIDIZED INSURANCE RISK-BASED INSURANCE WELFARE INEQUALITY CLIMATE CHANGE Flood exposure is likely to increase in the future as a direct consequence of more frequent and more intense flooding and the growth of populations and economic assets in flood-prone areas. Low-income households, which are more likely to be located in high-risk zones, will be particularly affected. This paper assesses the welfare and equity impacts of three flood management policies—risk-based insurance, zoning, and subsidized insurance—using an urban economics framework with two income groups and three potential flood locations. The paper shows that in a first-best setting, risk-based insurance maximizes social welfare. However, depending on flood characteristics, implementing a zoning policy or subsidized insurance is close to optimal and can be more feasible. Subsidizing insurance reduces upward pressure on housing rents but increases flood damage, and is recommended for rare floods occurring in a large part of a city. Zoning policies have the opposite effect, avoiding damage but increasing housing rents, and are recommended for frequent floods in small areas. The social welfare impact of choosing the wrong flood management policy depends on the location of floods relative to employment centers, with flooding close to employment centers being particularly harmful. Implementing flood management policies redistributes flood costs between high- and low-income households through land markets, irrespective of who is directly affected. As such, they are progressive in terms of equity, compared to a laissez-faire scenario with myopic anticipations, in the more common scenario where poorer populations are more exposed to urban floods. But their impacts on inequality depend on flood locations and urban configuration. For instance, in a city where floods are centrally located and low-income households live in the city center, subsidized insurance would mitigate a surge in inequality, whereas a zoning policy could substantially increase inequalities. 2023-02-13T21:13:16Z 2023-03-06T15:50:54Z 2023-02-13T21:13:16Z 2023-03-06T15:50:54Z 2023-02 Working Paper Document de travail Documento de trabajo http://documents.worldbank.org/curated/en/099527102062332327/IDU0e0eee23a036c7040f20898009edeafa81b36 http://hdl.handle.net/10986/39409 English en Policy Research Working Papers;10292 CC BY 3.0 IGO World Bank http://creativecommons.org/licenses/by/3.0/igo application/pdf text/plain World Bank, Washington, DC |
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DISASTER RISK MANAGEMENT URBAN FLOODS URBAN ECONOMICS LAND USE ZONING SUBSIDIZED INSURANCE RISK-BASED INSURANCE WELFARE INEQUALITY CLIMATE CHANGE DISASTER RISK MANAGEMENT URBAN FLOODS URBAN ECONOMICS LAND USE ZONING SUBSIDIZED INSURANCE RISK-BASED INSURANCE WELFARE INEQUALITY CLIMATE CHANGE |
spellingShingle |
DISASTER RISK MANAGEMENT URBAN FLOODS URBAN ECONOMICS LAND USE ZONING SUBSIDIZED INSURANCE RISK-BASED INSURANCE WELFARE INEQUALITY CLIMATE CHANGE DISASTER RISK MANAGEMENT URBAN FLOODS URBAN ECONOMICS LAND USE ZONING SUBSIDIZED INSURANCE RISK-BASED INSURANCE WELFARE INEQUALITY CLIMATE CHANGE Liotta, Charlotte Avner, Paolo Hallegatte, Stéphane Avner, Paolo Efficiency and Equity in Urban Flood Management Policies |
description |
Flood exposure is likely to increase
in the future as a direct consequence of more frequent and
more intense flooding and the growth of populations and
economic assets in flood-prone areas. Low-income households,
which are more likely to be located in high-risk zones, will
be particularly affected. This paper assesses the welfare
and equity impacts of three flood management
policies—risk-based insurance, zoning, and subsidized
insurance—using an urban economics framework with two income
groups and three potential flood locations. The paper shows
that in a first-best setting, risk-based insurance maximizes
social welfare. However, depending on flood characteristics,
implementing a zoning policy or subsidized insurance is
close to optimal and can be more feasible. Subsidizing
insurance reduces upward pressure on housing rents but
increases flood damage, and is recommended for rare floods
occurring in a large part of a city. Zoning policies have
the opposite effect, avoiding damage but increasing housing
rents, and are recommended for frequent floods in small
areas. The social welfare impact of choosing the wrong flood
management policy depends on the location of floods relative
to employment centers, with flooding close to employment
centers being particularly harmful. Implementing flood
management policies redistributes flood costs between high-
and low-income households through land markets, irrespective
of who is directly affected. As such, they are progressive
in terms of equity, compared to a laissez-faire scenario
with myopic anticipations, in the more common scenario where
poorer populations are more exposed to urban floods. But
their impacts on inequality depend on flood locations and
urban configuration. For instance, in a city where floods
are centrally located and low-income households live in the
city center, subsidized insurance would mitigate a surge in
inequality, whereas a zoning policy could substantially
increase inequalities. |
format |
Working Paper |
topic_facet |
DISASTER RISK MANAGEMENT URBAN FLOODS URBAN ECONOMICS LAND USE ZONING SUBSIDIZED INSURANCE RISK-BASED INSURANCE WELFARE INEQUALITY CLIMATE CHANGE |
author |
Liotta, Charlotte Avner, Paolo Hallegatte, Stéphane Avner, Paolo |
author_facet |
Liotta, Charlotte Avner, Paolo Hallegatte, Stéphane Avner, Paolo |
author_sort |
Liotta, Charlotte |
title |
Efficiency and Equity in Urban Flood Management Policies |
title_short |
Efficiency and Equity in Urban Flood Management Policies |
title_full |
Efficiency and Equity in Urban Flood Management Policies |
title_fullStr |
Efficiency and Equity in Urban Flood Management Policies |
title_full_unstemmed |
Efficiency and Equity in Urban Flood Management Policies |
title_sort |
efficiency and equity in urban flood management policies |
publisher |
World Bank, Washington, DC |
publishDate |
2023-02-13T21:13:16Z |
url |
http://documents.worldbank.org/curated/en/099527102062332327/IDU0e0eee23a036c7040f20898009edeafa81b36 http://hdl.handle.net/10986/39409 |
work_keys_str_mv |
AT liottacharlotte efficiencyandequityinurbanfloodmanagementpolicies AT avnerpaolo efficiencyandequityinurbanfloodmanagementpolicies AT hallegattestephane efficiencyandequityinurbanfloodmanagementpolicies AT avnerpaolo efficiencyandequityinurbanfloodmanagementpolicies AT liottacharlotte asystematicurbaneconomicsexploration AT avnerpaolo asystematicurbaneconomicsexploration AT hallegattestephane asystematicurbaneconomicsexploration AT avnerpaolo asystematicurbaneconomicsexploration |
_version_ |
1787227651585343488 |