The Unintended Consequences of Post-Disaster Policies for Spatial Sorting

Henkel, Marcel; Eunjee, Kwon; Magontier, Pierre (June 2022). The Unintended Consequences of Post-Disaster Policies for Spatial Sorting (CRED Research Paper 37). Bern: CRED - Center for Regional Economic Development

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Post-disaster aid aims to relieve affected communities, but excessive bailouts may
Encourage economic activity to remain in exposed areas. We provide new empirical
and theoretical evidence on the spatial consequences of post-disaster policies related
to political motives. Using the exogenous variation in the timing of natural disasters,
we show that hurricanes close to Election Day lead to increased post-disaster efforts
at the local level and result in increased population sorting into the impacted areas.
To quantify and comprehend the implications of this new sorting pattern for the
aggregate economy, we introduce the relationship between electoral cycles and post-disaster policies as a new feature in a dynamic spatial general equilibrium model. We
show that households respond to current post-disaster policies by sorting in hazard-prone coastal areas. Under the assumption of no climate change, current post-disaster
policies improve aggregate welfare at the expense of overall GDP and productivity
losses.

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5 Citations in Web of Science ®
6 Citations in Scopus

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