Landry, Craig E. and Jahan-Parvar, Mohammad R. (2008): Flood Insurance Coverage in the Coastal Zone.
Download (348kB) | Preview
We explore behavior and test theory regarding the determinants of flood insurance coverage in the coastal zone using household-level data for nine southeastern counties. We use Tobit regression models to assess the importance and magnitude of insurance cost, risk factors, community characteristics, and household attributes on flood insurance purchase for residential building structures. Overall estimates indicate price inelastic demand, though subsidized policyholders are more sensitive to price and hold greater flood insurance coverage (controlling for value of asset at risk). We find support for rational choice in the coastal zone, with flood insurance coverage positively correlated in the level of flood risk. We find evidence that coastal erosion risk effects flood insurance demand, and that community level erosion hazard mitigation projects influence flood insurance holdings, with shoreline armoring appearing to act as a substitute and beach replenishment appearing to act as a complement.
|Item Type:||MPRA Paper|
|Original Title:||Flood Insurance Coverage in the Coastal Zone|
|Keywords:||Insurance coverage, flood, hazard, coastal, erosion, Tobit model|
|Subjects:||D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty
H - Public Economics > H1 - Structure and Scope of Government > H11 - Structure, Scope, and Performance of Government
Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q54 - Climate ; Natural Disasters and Their Management ; Global Warming
|Depositing User:||Mohammad R. Jahan-Parvar|
|Date Deposited:||04. Jun 2009 01:56|
|Last Modified:||14. Feb 2013 03:19|
Anderson, Dan R., 1974, The National Flood Insurance Program - Problems and Potential, Journal of Risk and Insurance, 41, 579-600.
Amemiya, Takeshi, 1973, Regression Analysis When the Dependent Variable is Truncated Normal, Econometrica, 41, 997-1016.
Amemiya, Takeshi, 1985, Advanced Econometrics, Harvard University Press, Cambridge, MA.
Baumann, Duane D. and John H. Sims, 1978, Flood Insurance: Some Determinants of Adoption, Economic Geography, 54(3), 189-96.
Browne, Mark J. and Robert E. Hoyt, 2000, The Demand for Flood Insurance: Empirical Evidence, Journal of Risk and Uncertainty, 20(3), 291-306.
Burby, Raymond J, 2001, Flood Insurance and Floodplain Management: the U.S. Experience, Environmental Hazards, 3, 111-22.
Casella, George, and Roger L. Berger, 2002, Statistical Inference, 2nd Edition, Duxbury-Thomson: Pacific Grove, CA.
Dixon, Lloyd, Noreen Clancy, Seth A. Seabury, and Adrian Overton, 2006, The National Flood Insurance Program’s Market Penetration Rate: Estimates and Policy Implications, Report for the Federal Emergency Management Agency (contract # 282-98-0029), RAND Corporation: Santa Monica, CA.
Efron, B. and R. Tibshirani, 1986, Bootstrap Methods for Standard Errors, Confidence Intervals, and Other Measures of Statistical Accuracy, Statistical Science 1(1), 54-77.
Goldenberg, S.B., C.W. Landsea, A.M. Mestas-Nuñez, and W.M. Gray, 2001, The Recent Increase in Atlantic Hurricane Activity: Causes and Implications, Science 293, 474-8.
Guiso, Luigi and Tullio Jappelli, 1998, Background Uncertainty and the Demand for Insurance against Insurable Risks, The Geneva Papers on Risk and Insurance Theory, 23, 7-27.
Heinz Center for Science, Economics and the Environment, 2000, Evaluation of Erosion Hazards, final report to FEMA, contract EMW-97-CO-0375. Copies available at www.heinzctr.org
Krantz, David H. and Howard C. Kunreuther, 2007, Goals and Plans in Decision Making, Judgment and Decision Making, 2(3), 137-168.
Kriesel, Warren, Alan Randall and Frank Lichtkoppler, 1993, Estimating the Benefits of Shore Erosion Protection in Ohio's Lake Erie Housing Market, Water Resources Research, 29(4), 795-801.
Kriesel, Warren and Craig Landry, 2004, Participation in the National Flood Insurance Program: An Empirical Analysis for Coastal Properties, Journal of Risk and Insurance, 71(3), 405-20.
Kunreuther, Howard, 1984, Causes of Underinsurance against Natural Disasters, The Geneva Papers on Risk and Insurance, 31, 206-20.
Kunreuther, Howard, 1996, Mitigating Disaster Losses through Insurance, Journal of Risk and Insurance, 12, 171-187.
Kunreuther, Howard, 1998a, Introduction, in Paying the Price: The Status and Role of Insurance Against Natural Disasters in the United States, Kunreuther, Howard and Richard Roth (Eds.), Joseph Henry Press: Washington, D.C.
Kunreuther, Howard, 1998b, Insurability Conditions and the Supply of Coverage, chapter 2 in Paying the Price: The Status and Role of Insurance Against Natural Disasters in the United States, Kunreuther, Howard and Richard Roth (Eds.), Joseph Henry Press: Washington, D.C.
Kunreuther, Howard and Mark Pauly, 2004, Neglecting Disaster: Why Don’t People Insure Against Large Losses? Journal of Risk and Uncertainty, 28(1), 5-21.
Kunreuther, Howard, W. Sanderson, and R. Vetschera, 1985, A Behavioral Model of the Adoption of Protective Activities, Journal of Economic Behavior and Organization 6, 1-15.
Lewis, Tracy, and David Nickerson, 1989, Self-Insurance Against Natural Disasters, Journal of Environmental Economics and Management, 16, 209-23.
MacDonald, Don N., James C. Murdoch and Harry L. White, 1987, Uncertain Hazards, Insurance, and Consumer Choice: Evidence from Housing Markets, Land Economics, 63(4), 361-71.
Marron, Donald B, 2006, The Budgetary Treatment of Subsidies in the National Flood Insurance Program: Testimony before the Senate Committee on Banking, Housing, and Urban Affairs (January 25).
McClelland, Gary H., William D. Schulze, and Don L. Coursey, 1993, Insurance for Low-Probability Hazards: A Bimodal Response to Unlikely Events, Journal of Risk and Uncertainty, 7(1), 95-116.
Michel-Kerjan, Erwann and Carolyn Kousky, 2008, Come Rain or Shine: Evidence on Flood Insurance Purchases in Flordia, working paper, Wharton School, University of Pennsylvania.
Mossin, Jan, 1968, Aspects of Rational Insurance Purchasing, Journal of Political Economy, 76(4), 552-68.
Murphy, Kevin M., and Robert H. Topel, 1986, Estimation and Inference in Two-Step Econometric Models, Journal of Business and Economic Statistics, 3(4), 370-79.
Nordhaus, W.D., 2006, The Economics of Hurricanes in the United States, American Economic Association Annual Meetings: Boston, MA (January 6).
Palm, Risa, 1998, Demand for Disaster Insurance: Residential Coverage, chapter 3 in Paying the Price: The Status and Role of Insurance Against Natural Disasters in the United States, Kunreuther, Howard and Richard Roth (Eds.), Joseph Henry Press: Washington, D.C.
Pasterick, Edward T., 1998, The National Flood Insurance Program, chapter 6 in Paying The Price: The Status and Role of Insurance Against Natural Disasters in the United States, Kunreuther, Howard and Richard Roth (Eds.), Joseph Henry Press: Washington, D.C.
Pricewaterhouse Coopers, 1999, Study of the Economic Effects of Charging Actuarial Based Premium Rates for Pre-FIRM structures I. Executive Summary. Pricewaterhouse Coopers, Washington, D.C. (May 14).
Shao, J. and R. Sitter, 1996, Bootstrap for Imputed Survey Data, Journal of the American Statistical Association 91(435), 1278-88.
Smith, Vernon L., 1968, Optimal Insurance Coverage, Journal of Political Economy, 76(1), 68-77.
Tobin, James, 1958, Estimation for Relationships with Limited Dependent Variables, Econometrica, 26(1), 24-36.
Tobin, S. and C. Calfee, 2005, The National Flood Insurance Program’s Mandatory Purchase Requirement: Policies, Processes, and Stakeholders, American Institute for Research; Washington, D.C.
U.S. General Accounting Office (GAO), 1983, National Flood Insurance Program: Major Changes Needed if it is to Operate Without a Federal Subsidy, RCED-83-53, Washington, D.C. (January).
Wharton Risk Management and Decision Processes Center, 2008, Managing Large-Scale Risks in a New Era of Catastrophes, University of Pennsylvania: Philadelphia, PA.
Webster, P.J., G.J. Holland, J.A. Curry, and H.-R. Chang, 2005, Changes in Tropical Cyclone Number, Duration, and Intensity in a Warming Environment, Science, 309, 1844-6.
Wooldridge, J., 2001, Econometric Analysis of Cross Section and Panel Data. MIT Press.