The Distributional Impact of FEMA's Community Rating System
Abstract
CRS incentivizes investments in risk reduction above NFIP standards using insurance premium discounts. These discounts are subsidized by increasing premiums in non-CRS communities. We examine the distributional impact of this cross-subsidization process. We find that redistribution does occur, but the gains and losses are not economically large with 95% of households gaining or losing no more than 0.3% of their income. We also find that the strongest predictor of gains is flood risk. Thus, CRS appears to reduce the cost of living in the riskier communities, a result that has clear policy implications if it induces sorting into riskier locations.
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Yongwang Ren
PhD candidate in Energy, Environmental and Food Economics
I am a Ph.D. candidate in the Department of Agricultural Economics, Sociology, and Education at Pennsylvania State University. My research interests are in environmental economics, agricultural economics, and public policy analysis, with a focus on adaptation and policy in response to natural disasters, such as flooding. I am on the 2023-2024 job market and will be available for interviews.