Analysis of Spatial Variation in Flood Risk Perception
AbstractWe use hedonic property models to estimate the spatial variation in flood risk in the city of Albany, GA. In addition to knowing whether a property is in the floodplain, we have a unique dataset with actual inundation maps from tropical storm Alberto that hit Albany in 1994. In the absence of information on the structural damages caused by a flood, having information on the actual inundated area can be useful to tease out information effect of a new flood from potential reconstruction cost. We find that the discount in actually inundated properties is larger which supports our hypothesis that homeowners respond better to what they have visualized (“seeing is believing”) and also the potential reconstruction cost in addition to information effect is capitalized in property prices.
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Bibliographic InfoPaper provided by Southern Agricultural Economics Association in its series 2012 Annual Meeting, February 4-7, 2012, Birmingham, Alabama with number 119738.
Date of creation: 2012
Date of revision:
Flood Risk; Inundation; Spatial; Discount; Environmental Economics and Policy; Land Economics/Use; Q; R;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-02-08 (All new papers)
- NEP-ENV-2012-02-08 (Environmental Economics)
- NEP-GEO-2012-02-08 (Economic Geography)
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- Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
- Bernard Fingleton & Julie Le Gallo, 2008. "Estimating spatial models with endogenous variables, a spatial lag and spatially dependent disturbances: Finite sample properties," Papers in Regional Science, Wiley Blackwell, vol. 87(3), pages 319-339, 08.
- Bernard Fingleton, 2008. "A generalized method of moments estimator for a spatial model with moving average errors, with application to real estate prices," Empirical Economics, Springer, vol. 34(1), pages 35-57, February.
- Kelejian, Harry H. & Prucha, Ingmar R., 2010. "Specification and estimation of spatial autoregressive models with autoregressive and heteroskedastic disturbances," Journal of Econometrics, Elsevier, vol. 157(1), pages 53-67, July.
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