Measuring impacts of extreme weather events using the life satisfaction approach

•We estimate well-being effects of extreme weather events (floods and storm & hail events).•We find a small but significant decline in life satisfaction due to an extreme weather event.•While storms tend to have a short term effect on subjective well-being, the effect of floods persists much longer.•The results indicate that insurances can at least partly offset well-being losses from floods.

Extreme weather events cause harm among the aggrieved party that often goes beyond material damages. This paper studies the impact of extreme weather events on measures of self-reported life satisfaction. Focusing on Germany, we use representative panel data for 2000-2011 to study the effect of seven storm & hail events and five floods on subjective well-being in the affected NUTS 3 regions. Our results indicate that both weather experiences bear statistically significant negative externalities. Following an extreme weather event, life satisfaction is reduced by 0.020-0.027 on the 11-point scale. While the effect of storm & hail events is rather immediate in nature, the effect from floods persists much longer.