Business as usual? The Dynamics of Land Development Around Floodplains
The effects of natural disasters on land development are unclear. Using a rich dataset on historical flood records and the universe of buildings in Spain, we document the patterns of land development in the aftermath of an inundation. We show that, on average, new development is not affected by a flood. In particular, residential buildings continue being built close to potentially dangerous areas. Additionally, we show that signaling an area as potentially dangerous is not enough to deter new development from locating nearby. Moreover, not imposing building restrictions immediately after the areas' designation may cause an increase in development nearby.