Welfare effects and the immaterial costs of coastal flooding
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Welfare effects and the immaterial costs of coastal flooding. / Lautrup, Marie; Matthiesen, Lasse Læbo; Jacobsen, Jette Bredahl; Panduro, Toke Emil.
In: Environmental and Resource Economics, Vol. 85, 2023, p. 415–441.Research output: Contribution to journal › Journal article › Research › peer-review
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TY - JOUR
T1 - Welfare effects and the immaterial costs of coastal flooding
AU - Lautrup, Marie
AU - Matthiesen, Lasse Læbo
AU - Jacobsen, Jette Bredahl
AU - Panduro, Toke Emil
N1 - Publisher Copyright: © 2023, The Author(s), under exclusive licence to Springer Nature B.V.
PY - 2023
Y1 - 2023
N2 - A flood can be a severe event, causing not only material damage but also immaterial, such as stress and discomfort. Yet, the risk of flooding may not always be known to house buyers before purchase. In this paper, we estimate the immaterial cost of flood risk from coastal flooding using the hedonic house price approach. The analysis is based on a rich house price dataset that identifies flooded houses using insurance data. The design of the insurance mechanism makes it possible to separate material and immaterial damage as all houses are insured independently of the flood risk. Applying a difference-in-differences design, we study the effect of changes in flood risk information, namely the publication of flood maps, and a flood event in Denmark in 2013. By estimating a time-variant house price function, we can infer the welfare implications of non-marginal changes in flood-risk perception. We find that households have a maximum WTP of 21% of the house price to avoid being flooded after a flood event and that this effect diminishes over time. Houses located in a flood risk zone are sold with an 8.4% price discount but controlling for inundation removes the impact of the flood map.
AB - A flood can be a severe event, causing not only material damage but also immaterial, such as stress and discomfort. Yet, the risk of flooding may not always be known to house buyers before purchase. In this paper, we estimate the immaterial cost of flood risk from coastal flooding using the hedonic house price approach. The analysis is based on a rich house price dataset that identifies flooded houses using insurance data. The design of the insurance mechanism makes it possible to separate material and immaterial damage as all houses are insured independently of the flood risk. Applying a difference-in-differences design, we study the effect of changes in flood risk information, namely the publication of flood maps, and a flood event in Denmark in 2013. By estimating a time-variant house price function, we can infer the welfare implications of non-marginal changes in flood-risk perception. We find that households have a maximum WTP of 21% of the house price to avoid being flooded after a flood event and that this effect diminishes over time. Houses located in a flood risk zone are sold with an 8.4% price discount but controlling for inundation removes the impact of the flood map.
KW - Climate change
KW - Difference-in-differences
KW - Flood
KW - Flood risk
KW - Hedonic valuation
KW - Willingness to pay
U2 - 10.1007/s10640-023-00771-9
DO - 10.1007/s10640-023-00771-9
M3 - Journal article
AN - SCOPUS:85150373613
VL - 85
SP - 415
EP - 441
JO - Environmental and Resource Economics
JF - Environmental and Resource Economics
SN - 0924-6460
ER -
ID: 340847304