The effects of hazard risk information on locations of firms by industry in tsunami-prone coastal areas

Kono, Tatsuhito and Tatano, Hirokazu and Ushiki, Kenji and Nakazono, Daisuke and Sugisawa, Fumihito (2022): The effects of hazard risk information on locations of firms by industry in tsunami-prone coastal areas.

Abstract

The construction of seawalls changes the risk of tsunami inundation and the locations of firms behind the seawalls. In order to estimate the benefits of seawalls and to design land use planning behind seawalls, it is necessary to know the impact of risk reduction on the location of firms. To capture such impacts, we estimate the effects of changes in tsunami inundation risk information on the number of firms behind the seawalls. The data is from Japanese areas with a high possibility of a tsunami. There are regional fixed effects by industry and spatial heterogeneities in risks due to the topographic conditions. We first rigorously derive a fixed-effects model in uncertain situations with expected profits of firms, and theoretically find that, unlike in situations of certainty, we should factor in the interaction between regional fixed effects and the change in risks besides the usual regional fixed effects. Our empirical estimation finds that awareness of a high inundation risk has a negative impact on industries with demand in a wide range of areas, such as manufacturing and wholesale, but no impact on industries with localized demand, such as education and clinics.

• Item Type: MPRA Paper
• Language: English
• Keywords: Difference-in-differences, Relocation of firms, Tsunami hazard map
• Subjects: R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location

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