Inundated by Change: The Effects of Land Use on Flood Damages

Abstract

Proper land-use policy can help mitigate damages from natural disasters. Management of such policy occurs at different geographic levels, with potential implications for optimal management given the level of aggregation. This study examines this by quantifying the effects of land-use change on flood damages in the state of Texas. I link claims data from the National Flood Insurance Program to a series of land-use changes to construct a tract-by-month panel, and use exogenous variation in precipitation across tract-months to estimate the effect of changes in land use on the frequency and magnitude of new flood insurance claims. I find that increases in impervious surface development within a tract increase flood insurance claims, while increases in water coverage and other natural covers decrease these claims. In addition, using variation in tract-level elevation, I show that land-use change in neighboring geographies---particularly those uphill---affects own-tract flood insurance claims. Overall, these results suggest existence of spatial spillovers from land-use changes within a geography, and imply returns to coordination in land-use policy across geographies.

Keywords: Mitigation, Urban planning, Climate change, Land Use

JEL Classification: Q54, Q56, R14, R52