Do Floods Have Permanent Effects? Evidence From the Netherlands

ABSTRACT This study investigates the short‐ and long‐run impact on population dynamics of the major flood in the Netherlands in 1953. A dynamic difference‐in‐differences analysis reveals that the flood had an immediate negative impact on population growth, but limited long‐term effects. In contrast, the resulting flood protection program (Deltaworks), had a persisting positive effect on population growth. As a result, there has been an increase in population in flood‐prone areas. Our results suggest a moral hazard effect of flood mitigation leading to more people locating in flood‐prone areas, increasing potential disaster costs.