Public flood risk mitigation and the homeowner’s insurance demand response

Abstract

This paper investigates the influence of public risk mitigating activities on individuals’ decisions to privately mitigate their disaster risks through changes in their risk perceptions. We exploit heterogeneity in measures under the U.S. Community Rating System to empirically demonstrate that public investment in flood risk communication activities crowds-in individuals’ flood insurance demand while activities that lower the flood hazard residents face crowd-out individuals’ flood insurance demand. This paper contributes to the discussion of the efficacy of disaster risk mitigation strategies and who ultimately bears the costs of natural disasters.