Who Pays? Cost-Sharing for Disaster Management in the US and Japan

Whether national and local governments should as-sume larger financial responsibility for reducing dis-aster risk remains a controversial issue. Local govern-ments lack resources to cover the full cost of managing mega-disasters and need assistance from higher level governments. However, national governments cover-ing all costs may create moral hazards, discouraging local governments from investing in ex-ante measures. This study identifies national and local governments' fiscal responsibility determinants for disaster manage-ment. Despite the differences between the federal sys-tem in the US and the centralized system in Japan, the two countries' national governments share common practices. Both have continuously developed legisla-tion to expand their financial responsibilities for re-lief and recovery efforts as disaster consequences have increased. We argue that despite major institutional differences in Japan's unitary and the US federal gov-ernment systems, both have expanded the areas cov-ered by national assistance along with the amount over time. These findings bring with them recommenda-tions for governments in an era of increasing extreme weather events due to climate change.

Automated summary

The issue of whether national and local governments should assume larger financial responsibility for reducing disaster risk is still controversial. Local governments lack resources to cover the full cost of managing mega-disasters and need assistance from higher level governments. However, national governments covering all costs may discourage local governments from investing in pre-disaster measures.