Silver lining of the water: The role of government relief assistance in disaster recovery

Abstract

Combining three datasets, the Australian Longitudinal Census Panel of 2006 and 2011, engineering data on flood-water height, and administrative data on government relief assistance, we investigate whether and how the government’s post-disaster relief payments helped the economic recovery from riverine floods that struck the state of Queensland in Australia in 2010/11. Using a difference-in-differences methodology that compares the flooded areas with unflooded zones within Queensland whereby the flooded zones differed in their levels of flooding and the government’s relief assistance, we find that the government’s disaster relief assistance was effective in economic recovery, having led individuals residing in flooded areas with average flood height to experience a 3.4 percent rise in (self-reported) income following the disaster, relative to those individuals living in unflooded areas of the state. Our findings are robust to a battery of sensitivity tests, including migration, parallel trends, spatial spillovers, and possible confounders.