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Uncertainty of Governmental Relief and the Crowding out of Flood Insurance

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Abstract

This paper discusses the problem of crowding out of insurance by co-existing governmental relief programs—the so-called ‘charity hazard’—in the context of different institutional schemes of governmental disaster relief in Austria and Germany. We test empirically whether an assured partial relief scheme (as in Austria) drives a stronger crowding out of private insurance than a scheme promising full relief which is subject to ad-hoc political decision making (as in Germany). Our general finding is that the institutional design of governmental relief programs significantly affects the demand for private natural hazard insurance.

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Authors and Affiliations

  1. Department of Economics, Monash University, 900 Dandenong Road, Caulfield East, VIC, 3145, Australia

    Paul A. Raschky

  2. UFZ, Helmholtz Centre for Environmental Research, Permoserstrasse 15, 04318, Leipzig, Germany

    Reimund Schwarze

  3. European University Viadrina, Grosse Scharrnstrasse 59, 15230, Frankfurt (Oder), Germany

    Reimund Schwarze

  4. Institute of Public Finance, University of Innsbruck, Universitätsstrasse 15, 6020, Innsbruck, Austria

    Manijeh Schwindt

  5. Institute of Risk Management and Insurance, Ludwig-Maximilian-University Munich, Schackstrasse 4/III, 80539, Munich, Germany

    Ferdinand Zahn

Authors
  1. Paul A. Raschky
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  2. Reimund Schwarze
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  3. Manijeh Schwindt
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  4. Ferdinand Zahn
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Corresponding author

Correspondence to Paul A. Raschky.

Additional information

We would like to thank seminar participants at the Universities of Innsbruck and Zurich, Andrea Leiter, Michael Pfaffermayr, as well as the editor and one anonymous referee, for valuable discussions and helpful comments. An earlier version of this paper originated as part of the project “Alternative Finanzierungs- und Versicherungslösungen” at the alpS-Center for Natural Hazard Management in Innsbruck. The project received financial support from the Präventionsstiftung der Kantonalen Gebäudeversicherungen Schweiz.

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Raschky, P.A., Schwarze, R., Schwindt, M. et al. Uncertainty of Governmental Relief and the Crowding out of Flood Insurance. Environ Resource Econ 54, 179–200 (2013). https://doi.org/10.1007/s10640-012-9586-y

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