Disaster Policy in the US Federation: Intergovernmental Incentives and
Institutional Reform
by
David E. Wildasin Martin School of Public Policy and Department of Economics University of Kentucky Lexington, KY 40506-0027 USA
Abstract
The devastation resulting from the hurricanes of 2005 could largely
have been avoided at modest cost, evidence of a policy failure that
may stem from misaligned incentives among levels of government. In
particular, Federal government provision of ex post disaster relief
means that subnational governments are not rewarded for costly but
socially efficient policies that limit disaster losses. A system of
Federally-mandated, state-funded disaster reserves would strengthen
subnational government incentives to implement more disaster-averse
policies. Illustrative calculations show that the costs of such
reserves would vary widely by state but would not impose undue burdens
on state fiscal systems.
