The Unintended Consequences of Post-Disaster Policies for Spatial Sorting

Abstract

We provide new empirical and theoretical evidence on the spatial consequences of public policies driven by electoral motives. Using exogenous variation in the timing of natural disasters, we show that hurricanes occurring close to Election Day in the United States lead to increased local post-disaster efforts. These electorally motivated measures lead populations to sort into hazard-prone areas. To comprehend the aggregate implications of this sorting pattern, we introduce the relationship between electoral cycles and public policies in a spatial equilibrium model. These electorally motivated policies generate considerable productivity and output losses without being compensated by aggregate welfare gains.

Keywords: Natural Disasters, Electoral Cycles, Fiscal Policies, Spatial Sorting

JEL Classification: H7, H84, P48, R12, R13