Does post-disaster aid promote community resilience? Evidence from federal disaster programs

Climate- and weather-related disasters have become increasingly frequent and costly, resulting in substantial government spending on disaster assistance. Yet less is known about the effectiveness of disaster aid in enhancing community resilience to future disaster risks. This study examines multiple post-disaster aid programs implemented by the US federal government to support state and local governments as well as households and private businesses. Specifically, we estimate the risk-mitigating effects of these disaster-related programs by linking program spending with reported economic losses from flooding. Our empirical analysis utilizing panel data at the county level finds that low-interest disaster loans lead to the largest reduction in subsequent flooding damage, and grants targeting public infrastructure restoration and flood control measures also reduce future flooding losses. Results suggest a limited loss-mitigating effect of disaster cash aid given to private individuals. These findings provide important implications for federal disaster policy design and suggest that more efficiency gains could be realized by redistributing funds and streamlining processes across programs and agencies.