The Early View release of Review of Policy Research includes the article “Do Disasters Lead to Learning? Financial Policy Change in Local Government” by Deserai Crow (UC-Denver), Elizabeth Albright (Duke), Todd Ely (UC-Denver), Elizabeth Koebele (UN-Reno), and Lydia Lawhon (UC-Bolder). The paper is a good example of comparative case study research, with a mix of qualitative and quantitative evidence from Colorado communities after a catastrophic flood episode in 2013. The better access you have to adequate and flexible funds, the more likely you are able to prioritize important recovery projects in an efficient way, so this matters a lot in both the short and long-run recovery phase of the disaster effort.
One of the main findings is that local governments learned how unwieldy FEMA reimbursements are [page 15]:
Indeed, for communities with significant flood damage, the Town of Estes Park’s description of its post-flood financial challenges typifies the breadth of the flood’s effects in areas such as […] dealing with the uncertainty in reimbursements.
[…] The Town continues to face challenges managing its fund balances and cash flow because agency reimbursements for flood repair are unpredictable in both amount and timeliness.
[…] As an illustration, FEMA data indicate that at least 18 different federal agencies or programs were involved in Colorado flood recovery funding after the 2013 floods. The complexities and delays associated with navigating these various agencies and programs can be substantial for local governments…
So what types of policy changes were made as a result of this experience? Page 21:
Reserve policies were changed in some of the local governments following the flood. This may potentially indicate that the community learned about the importance of having large, flexible reserves during a disaster, or at least recognized the barriers associated with limited reserves described above. The City of Boulder, most prominently, increased the targeted reserve level following the floods from 10% to 16% of general fund expenditures and created temporary reserve requirements to address the uncertainty of reimbursements.
Of course, because it is a qualitative case study investigation, the authors do not make any specific claims on things like what and how much changes occurred in response to the uncertainties of reimbursement, specifically as opposed to maybe revised flood expectations.
Generally, I would like to see more research on the question of how much government inefficiency is caused by regulations imposed by other governments (intergovernmental regulation or government-to-government regulation). Recall the criticism by state and local officials of the federal bureaucracy in the BP oil spill that allegedly distorted or delayed their responses. (You do get papers, however, on market value consequences for the private sector.) You can imagine a counterfactual business-school version of the Crow et al. paper where the findings are interpreted as a kind of deadweight loss due to federal regulatory inefficiency. Of course, being local governments, there aren’t profit signals that easily lend in that direction. Nevertheless, the changes documented by Crow et al. (e.g., change in reserves, the new departments, hiring staff, etc.) is a step in that direction.
If you find intergovernmental regulation interesting, I recommend David Konisky and Manuel Teodoro’s “When Governments Regulate Governments” in the American Journal of Political Science (2016).