An ignored relationship: Extreme events and fiscal centralism in Chile

Chile is a highly centralized country with high levels of risk from disasters and extreme events. This double feature has encouraged the creation of several public organizations with a strong territorial vocation, and public innovations have been developed in subnational public management to improve emergency containment, recovery, or reconstruction when necessary. However, even if strong local and subnational governments are considered essential for risk prevention, it seems that the occurrence of extreme events tends to reinforce fiscal centralism, and not to empower local administrations. This article analyses the budgetary effects of extreme events on the relationship between the central government and the Chilean regions between 1992 and 2022. For this, a measurement is designed to compare the amount of money invested by the sixteen regional governments versus the central government's investment in each region over three decades, putting a special focus on years with extreme events. The results show that central investment increases in regions where extreme events are highly destructive, which reinforces fiscal centralism. This goes in the opposite direction to current risk prevention literature, which points to the need for strong subnational governments capable of facing extreme situations.