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The economics of floods

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The misery that floods are inflicting on residents of northern England and Scotland is part of a major global problem. Over the past 30 years, floods worldwide killed more than 500,000 people and displaced over 650 million people.

In a new study published by the Centre for Economic Performance (CEP), based at LSE, Dr Guy Michaels and colleagues examine why so many people are hit by floods year after year. In particular, the research examines whether urban populations respond to large floods by moving to safer areas.

floodsThe researchers study the effects of more than 50 large floods, which displaced at least 100,000 people each, in over 1,800 cities in 40 countries from 2003 to 2008. They find that low-lying urban areas are hit much more often by large floods, and yet have a higher density of economic activity. When cities are hit by large floods, the low-lying areas also sustain more damage – but like the rest of the flooded cities, they recover rapidly and economic activity does not move to safer locations.

So why do urban populations not respond to floods by moving to safer areas? Part of the problem is that many historical cities were built in flood-prone locations, the risks of which were once offset by access to rivers or oceans. These cities persisted in their flood-prone locations even when modern land transport reduced the importance of access to waterways. This problem may be particularly severe in Britain, with its long maritime history.

But this is not the only reason why flood-prone locations are overpopulated. Because governments bear much of the costs of building and maintaining flood defences and compensating flood victims, private developers have an incentive to build in cheap flood-prone areas. As a result, too many people end up living in these risky areas.

Co-author Dr Guy Michaels comments: ‘With sea levels rising and a changing climate, the problem of large-scale flooding will sadly be with us for many years to come.’

‘To begin containing this problem, we should at the very least tighten the restrictions on new construction in flood-prone areas.’

Posted 5 January 2016 

Image credit: David Emley, used under CC BY-SA 2.0

 

 

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