Flooded Cities

March 21 2018

Does economic activity relocate away from areas that are at high risk of recurring shocks? We examine this question in the context of floods, which are among the costliest and most common natural disasters. Over the past thirty years, floods worldwide killed more than 500,000 people and displaced over 650,000,000 people. This paper analyzes the effect of large scale floods, which displaced at least 100,000 people each, in over 1,800 cities in 40 countries, from 2003-2008. We conduct our analysis using spatially detailed inundation maps and night lights data spanning the globe's urban areas, which we use to measure local economic activity. We find that low elevation areas are about 3-4 times more likely to be hit by large floods than other areas, and yet they concentrate more economic activity per square kilometer. When cities are hit by large floods, these low elevation areas also sustain damage, but like the rest of the flooded cities they recover rapidly, and economic activity does not move to safer areas. Only in more recently populated urban areas, flooded areas show a larger and more persistent decline in economic activity. Our findings have important policy implications for aid, development and urban planning in a world with rapid urbanization and rising sea levels.

Forthcoming, American Economic Journal: Applied Economics

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Authors

Adriana Kocornik-Mina is adjunct Professor at Georgetown University. Her main research interests are adaptation to climate change, Subnational patterns of risk from climate hazards and growth dynamics and vulnerability to climate change.

Guy Michaels is an Associate Professor in the Department of Economics at the London School of Economics and Political Science (LSE) and a research associate at Centre for Economic Performance (CEP) at the LSE.

Dr. Ferdinand Rauch is Associate Professor of Economics and Tutorial Fellow at Brasenose College, both at the University of Oxford.  His research interests are in international trade and urban economics.