How Climate Change Can Affect Where People Live? Evidence from Flood Surprises

Petkov, Ivan (2018): How Climate Change Can Affect Where People Live? Evidence from Flood Surprises.

Abstract

This paper examines the extent to which flood-risk revisions, on their own, can affect the size of the community and real estate values over time. I compile a new measure of insured and uninsured losses for 4,147 communities and identify relatively small flood events that occur in places with different flood history. I show that flood history determines the extent to which events are anticipated and covered by insurance. Only locations with flood surprises experience declines in population. These occur in attractive communities with high pre-flood growth where real estate prices do not compensate for higher flood risk. Flood surprises in communities where housing prices decrease and compensate for higher risk have stable population.

• Item Type: MPRA Paper
• Language: English
• Keywords: Migration, Population, Flood Surprises, Climate Change Real Estate, Natural Disasters
• Subjects: J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J61 - Geographic Labor Mobility ; Immigrant Workers; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q54 - Climate ; Natural Disasters and Their Management ; Global Warming; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R11 - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location > R30 - General

References

Albouy, D., Graf, W., Kellogg, R. and Wolff, H., (2016). ``Climate Amenities, Climate Change, and American Quality of Life.'' Journal of the Association of Environmental and Resource Economists , 3(1), pp.205-246.

Aldrich, D. P. (2012). Building resilience: Social capital in post-disaster recovery . University of Chicago Press.

Banzhaf, H. S. and Walsh, R. P. (2008). ``Do People Vote with Their Feet? An Empirical Test of Tiebout.'' American Economic Review , 98(3), 843-63.

Bin, O. and Polasky, S. (2004). ``Effects of Flood Hazards on Property Values: Evidence before and after Hurricane Floyd.'' Land Economics , 80(4), 490-500.

Blanchard, O. and Katz, L. (1992), ``Regional Evolutions,'' Brookings Papers on Economic Activity , 23, issue 1, p. 1-76.

Boustan, L.P., Kahn, M.E., Rhode, P.W. and Yanguas, M.L., (2017). ``The Effect of Natural Disasters on Economic Activity in US Counties: A Century of Data'' National Bureau of Economic Research , wp23410

Boustan, L.P., Kahn, M.E. and Rhode, P.W., (2012). ``Moving to Higher Ground: Migration Response to Natural Disasters in the Early Twentieth Century''. American Economic Review , 102(3), pp.238-44.

Bunten, D. and Kahn, M.E., (2014). ``The impact of emerging climate risks on urban real estate price dynamics.'' National Bureau of Economic Research , wp20018

Capozza, D. R. and Helsley, R. W. (1990). ``The Stochastic City.'' Journal of Urban Economics , 28(2), 187-203.

Davis, L. W. (2004). ``The Effect of Health Risk on Housing Values: Evidence from a Cancer Cluster.'' American Economic Review , 94(5), 1693-1704.

Desmet, K. and Henderson, J.V., (2015). ``The Geography of Development within Countries.'' In Handbook of Regional and Urban Economics (Vol. 5, pp. 1457-1517). Elsevier.

Desmet, K. and Rappaport, J., (2017). ``The Settlement of the United States, 1800?2000: the Long Transition towards Gibrat?s Law.'' Journal of Urban Economics , 98, pp.50-68.

Deryugina, T. (2017). ``The Fiscal Cost of Hurricanes: Disaster Aid versus Social Insurance.'' American Economic Journal: Economic Policy , 9(3), 168-98.

Diamond, R. (2016). ``The Determinants and Welfare Implications of US Workers' Diverging Location Choices by Skill: 1980-2000.'' American Economic Review , 106(3), 479-524.

Fulford, S., Petkov, I., and Schiantarelli, F. (2017). ``Does it matter where you came from? Ancestry composition and economic performance of US counties, 1850-2010.'' Working Paper

Gallagher, J. (2014). ``Learning about an Infrequent Event: Evidence from Flood Insurance Take-up in the United States''. American Economic Journal: Applied Economics , 6(3), 206-33.

% Glaeser, E. L. and Gottlieb, J. D. (2009). ``The Dealth of Cities: Agglomeration Economies and Spatial Equilibrium in the United States.'' Journal of Economic Literature , 47(4), 983-1028.

Glaeser, E. L. and Gyourko, J. (2005). ``Urban Decline and Durable Housing.'' Journal of Political Economy , 113(2), 345-375.

Glaeser, E.L., Kolko, J. and Saiz, A., (2001). ``Consumer city.'' Journal of Economic Geography , 1(1), pp.27-50.

Glaeser, E.L., Scheinkman, J. and Shleifer, A., (1995). ``Economic Growth in a Cross-Section of Cities.'' Journal of Monetary Economics , 36(1), pp.117-143.

Greenstone, M. and Gallagher, J. (2008). ``Does Hazardous Waste Matter? Evidence from the Housing Market and the Superfund Program.'' The Quarterly Journal of Economics , 123(3), 951-1003.

Gyourko, J. and Saiz, A. (2004). ``Reinvestment in the Housing Stock: the Role of Construction Costs and the Supply Side.'' Journal of Urban Economics , 55(2), 238-256.

Gyourko, J., Saiz, A. and Summers, A., (2008). ``A New Measure of the Local Regulatory Environment for Housing Markets: The Wharton Residential Land Use Regulatory Index.'' Urban Studies , 45(3), pp.693-729.

Hallstrom, D. G. and Smith, V. K. (2005). ``Market responses to hurricanes.'' Journal of Environmental Economics and Management , 50(3), 541-561.

% Jaffe, J. (2015) Disaster Dollars: Financial Preparation and Recovery for Towns, Businesses, Farms, and Individuals . Lulu Publishing Services

Kahn, M. E. (2000). ``Smog Reduction?s Impact on California County Growth.'' Journal of Regional Science , 40(3), 565-582.

Kahn, M.E., (2009). ``Urban Growth and Climate Change.'' Annu. Rev. Resour. Econ ., 1(1), pp.333-350.

Kahn, M.E. and Walsh, R., (2015). ``Cities and the Environment''. In Handbook of regional and urban economics (Vol. 5, pp. 405-465). Elsevier.

Kousky, C., (2017). ``Disasters as Learning Experiences or Disasters as Policy Opportunities? Examining Flood Insurance Purchases after Hurricanes.'' Risk Analysis , 37(3), pp.517-530.

Kousky, C., (2018). ``Financing Flood Losses: A Discussion of the National Flood Insurance Program.'' Risk Management and Insurance Review , 21(1), pp.11-32.

Moretti, E. (2011). ``Local Labor Markets.'' Handbook of Labor Economics (Vol. 4, pp. 1237-1313). Elsevier.

Murphy, A. and Strobl, E. (2010). ``The impact of hurricanes on housing prices: evidence from US coastal cities.'' Dallas Fed Working Paper

Notowidigdo, M J. ``The incidence of local labor demand shocks''. No. w17167. National Bureau of Economic Research, 2011.

Rosenthal, S. S. and Ross, S. L. (2015). ``Change and Persistence in the Economic Status of Neighborhoods and Cities.'' In Handbook of Regional and Urban Economics (Vol. 5, pp. 1047-1120). Elsevier.

Stein, J, ``�Prices and Trading Volume in the Housing market: A Model with Down payment Effects,�'' Quarterly Journal of Economics 110 (May 1995), 379-406.

Strobl, E. (2011). ``The Economic Growth Impact of Hurricanes: Evidence from US Coastal Counties.'' Review of Economics and Statistics , 93(2), 575-589.

Topel, R. H. (1986). ``Local Labor Markets''. Journal of Political economy , 94(3, Part 2), S111-S143.