Do natural disasters affect household saving? Evidence from the August 2002 flood in Germany

This study conducts a natural experiment that resulted from the European Flood of August 2002. The method used combines micro data with geo-coded flood maps, allowing the researchers to analyze the causal impact of flood exposure on household savings within a difference-in-differences setting. This research has been undertaken to address the underexplored questions of whether and how climate-related natural hazards affect household saving behavior.

The results show that the flood significantly reduced the probability to save and also depressed saving volumes of the affected households. The effect is more pronounced among those households which have been directly exposed by the flood but also holds for those who have lived close to the flood line. This pattern is robust to several changes in the empirical model and data used.