3. Chapter 3: Evaluating the Effectiveness of Household Level Flood Risk Reduction Measures by the Application of Propensity Score Matching

The employment of damage mitigation measures by individuals is an important component of integrated flood risk management. In order to promote efficient damage mitigation measures, accurate estimates of their damage mitigation potential are required. That is, for correctly assessing the damage mitigation measures’ effectiveness from survey data, one needs to control for sources of bias. A biased estimate can occur if risk characteristics differ between individuals who have, or have not, implemented mitigation measures. This study removed this bias by applying an econometric evaluation technique called Propensity Score Matching to a survey of German households along three major rivers that were flooded in 2002, 2005 and 2006. The application of this method detected substantial overestimates of mitigation measures’ effectiveness if bias is not controlled for, ranging from nearly €1,700 to €15,000 per measure. Bias-corrected effectiveness estimates of several mitigation measures show that these measures are still very effective since they prevent between €6,700-14,000 of flood damage per flood event. This study concludes with four main recommendations regarding how to better apply Propensity Score Matching in future studies, and makes several policy recommendations. 1 This chapter is based on: Hudson, P., Botzen, W.J.W., Kreibich, H., Bubeck, P., Aerts, J.C.J.H., 2014. Evaluating the effectiveness of flood damage mitigation measures by the application of propensity score matching. Natural Hazards and Earth System Sciences, 14, 1731-1747.