Open Access. Powered by Scholars. Published by Universities.®
Articles 1 - 1 of 1
Full-Text Articles in Law
The Perverse Effects Of Subsidized Weather Insurance, Kyle D. Logue, Omri Ben-Shahar
The Perverse Effects Of Subsidized Weather Insurance, Kyle D. Logue, Omri Ben-Shahar
Law & Economics Working Papers
This Article explores the role of insurance as a substitute for direct regulation of risks posed by severe weather. In pricing the risk of human activity along the predicted path of storms, insurance can provide incentives for efficient location decisions as well as for cost-justified mitigation effort in building construction and infrastructure. Currently, however, much insurance for severe weather risks is provided and heavily subsidized by the government. The Article demonstrates two primary distortions arising from the government’s dominance in these insurance markets. First, the subsidies are allocated differentially across households, resulting in a significant regressive redistribution, favoring affluent homeowners …