The Impact of the Flood on Income and Wealth Inequality
The economic work package of SOZIAHR examines how the flooding in the Ahr Valley, the subsequent insurance payouts, state aid and the reconstruction efforts have affected the economic situation of those affected in the medium and long term. The focus is on issues relating to income, wealth, employment, housing, relocation, insurance, grants and social inequality.
Profile
Academic disciplines
Economics
Head of Sub-Project
Jun.-Prof. Dr. Julia Mink
Jun.-Prof. Hanna Schwank, PhD
Objective
Recommendations for the cost-effective management of flood disasters, with particular regard to social inequalities
How do floods and the subsequent response—including insurance payouts, government aid, and reconstruction measures—affect household incomes and wealth, as well as their distribution, in the medium and long term? Which factors facilitate or hinder economic recovery?
- The effects of the flood and reconstruction process on income, wealth, employment, self-employment, housing, and residential mobility, as well as differences across population groups
- The role of insurance payouts, government assistance, private savings, and reconstruction decisions in widening or reducing economic inequalities
- A population survey conducted five years after the flood, collecting retrospective information on respondents’ economic and social circumstances immediately before and after the event, as well as their current situation; a follow-up survey around seven years after the flood will track subsequent developments
- Econometric analysis of medium- and long-term developments by comparing households exposed to different levels of flood severity using a difference-in-differences approach
- Integration of the econometric findings with document analysis and other qualitative evidence from the project’s other sub-projects
Research Objectives
We aim to understand who was most severely affected by the flood, which households were able to recover economically more quickly, and which groups continue to face its consequences years later. Our focus extends beyond the immediate damage caused by the flood. We also examine how it affected employment, self-employment, housing decisions, financial security, and trust in government support.
In addition, we study the role of insurance payouts, government assistance, private savings, reconstruction decisions, and experiences with public administration in shaping economic recovery. Particular attention is paid to groups that are often less visible in existing research, including the self-employed, small businesses, tenants, and households with limited financial reserves.
Methodology
Our analysis is based on econometric methods. In other words, we use statistical techniques to compare how individuals and households develop over time as precisely as possible. A key approach is a before-and-after comparison with a comparison group, commonly referred to in research as a difference-in-differences design.
Put simply, we compare how households that were severely affected by the flood have developed since the pre-flood period with the trajectories of households that were less severely affected or not directly affected. To do so, the survey collects information on households’ economic and social circumstances shortly before the flood, their situation five years later, and their subsequent development in a follow-up survey around seven years after the flood. This allows us to distinguish more clearly between changes that are likely related to the flood and the economic burden of reconstruction, and those that primarily reflect broader economic trends.
Outlook
The results will show whether and how the flood and reconstruction process have widened or reduced existing inequalities, what role insurance coverage, financial assistance, and experiences with public administration play in economic recovery, and which measures can effectively support people following a disaster.
Our aim is to develop evidence-based recommendations for policymakers and public authorities to help make future reconstruction processes more socially equitable, economically effective, and climate-resilient.
Sub-Project Lead
Jun.-Prof. Hanna Schwank Ph.D
