Disasters, vulnerability, and governance: spatial insights into local fiscal responses across jurisdictional boundaries

This study employs a spatial Durbin model (SDM) to analyse how natural disasters, social vulnerability, and local government spending affect the expenditures of neighbouring U.S. counties in 2012 and 2017. The results show positive spatial dependence in public spending, indicating that local government expenditures are significantly influenced by the fiscal decisions of proximate jurisdictions. Additionally, neighbouring disaster damage is associated with higher public welfare spending in 2012, whereas in 2017, characterised by more severe disaster losses, spillovers are more evident in protective functions, such as natural resource management and public safety. Notably, in such a severe disaster context, the interaction between neighbouring vulnerability and disaster damage is associated with an increase in total expenditures but negatively related to natural resource management and public safety spending. These results suggest that compound regional shocks can reshape local spending priorities by increasing overall fiscal responses while crowding out some long-term protective functions.