Extreme Weather Events and Heterogenous Environmental Spending Responses

• In Event: The Impacts of Extreme Weather

Abstract

Do extreme weather events impact environmental policy decisions? Extreme weather events have been shown to impact environmental concern and voting behavior in a wide range of countries and contexts. There is however less evidence of their impact on policy decisions. In this paper, we look at the impact of floods and landslides on environmental spending by Italian municipalities. Extreme weather often has very localized impacts, and fiscal policy is a key tool that can be used by local administrations to respond. We combine an original municipality-level dataset of floods and landslides with detailed data on public spending by Italian municipalities. Employing a difference-in-differences strategy with nearest neighbor matching, we show that floods and landslides increase the amount of resources that municipalities allocate to environmental protection, in terms of both current and capital expenditure. We further investigate whether the political orientation of local governments is a mediator of this effect, hypothesizing that left-wing local administrations are more likely to increase environmental spending in the wake of extreme weather events.

With Matteo Muntoni

Author

• Silvia Pianta, European Institute on Economics and the Environment