JUE insight: Floods & urban density

Abstract

This paper examines the effects of floods on urban development dynamics using geolocalized data on the universe of buildings in Spain from 1996 to 2021. We provide empirical evidence that floods promote local urban development, resulting in taller, more compact urban layouts that attract populations, increase property values, and shift land use away from the agricultural and industrial sectors. We argue that adaptive responses to natural disasters may trigger positive local spillovers strong enough to overcompensate for the flood’s destructive nature.