Market Failure in Information: The National Flood Insurance Program
AbstractThe National Flood Insurance Program (NFIP) was established in 1968 and requires mandatory flood insurance for property owners who have federally backed mortgages. Krutilla (1966) noted that a compulsory national flood insurance program could greatly improve the economic efficiency of flood plain occupancy in the United States. However, in order to realize the efficiency gains suggested by Krutilla, property owners must have sufficient information about flood risk and insurance premiums to make well-informed home purchase decisions. Using survey data from Boulder, Colorado, we find significant evidence of market failure in information in the NFIP program. The majority of survey respondents, all of whom live in a special flood hazard area, report they did not fully understand the degree of flood risk or the cost of insuring against this risk when negotiating the purchase of their property.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by University of Wisconsin Press in its journal Land Economics.
Volume (Year): 78 (2002)
Issue (Month): 4 ()
Contact details of provider:
Web page: http://le.uwpress.org/
Find related papers by JEL classification:
- Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Bagstad, Kenneth J. & Stapleton, Kevin & D'Agostino, John R., 2007. "Taxes, subsidies, and insurance as drivers of United States coastal development," Ecological Economics, Elsevier, vol. 63(2-3), pages 285-298, August.
- Hallstrom, Daniel G. & Smith, V. Kerry, 2005. "Market responses to hurricanes," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 541-561, November.
- Ellen Hanak & Georgina Moreno, 2012.
"California coastal management with a changing climate,"
Springer, vol. 111(1), pages 45-73, March.
- Ellen Hanak & Georgina Moreno, 2008. "California Coastal Management with a Changing Climate," PPIC Research Reports, Public Policy Institute of California, number coacli, July.
- V. Smith & Jared Carbone & Jaren Pope & Daniel Hallstrom & Michael Darden, 2006. "Adjusting to natural disasters," Journal of Risk and Uncertainty, Springer, vol. 33(1), pages 37-54, September.
- Shaw, W. Douglass & Woodward, Richard T., 2008. "Why environmental and resource economists should care about non-expected utility models," Resource and Energy Economics, Elsevier, vol. 30(1), pages 66-89, January.
- Julie Mueller & John Loomis & Armando González-Cabán, 2009. "Do Repeated Wildfires Change Homebuyers’ Demand for Homes in High-Risk Areas? A Hedonic Analysis of the Short and Long-Term Effects of Repeated Wildfires on House Prices in Southern California," The Journal of Real Estate Finance and Economics, Springer, vol. 38(2), pages 155-172, February.
- Sarmiento, Camilo & Miller, Ted E., 2006. "Inequities in Flood Management Protection Outcomes," 2006 Annual meeting, July 23-26, Long Beach, CA 21042, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.