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W.U.I. on Fire: Risk, Salience & Housing Demand

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  • Shawn J. McCoy
  • Randall P. Walsh

Abstract

We investigate the effects of wildfires on risk perceptions by quantifying the impact of severe wildfires on housing price and transaction dynamics. Our empirical results are interpreted through the lens of a parsimonious model of sorting between locations that vary in their perceived level of fire risk. The model allows us to infer the evolution of risk perceptions among potential sellers and buyers of properties located in the proximity of large wildfire events. Our empirical analysis is based on a multi-dimensional characterization of the potential linkages between fire events and risk perceptions which incorporates measures of both proximity and burn scar views as well as a properties latent wildfire risk. Our analysis provides a connection between changes in underlying risk perceptions and the observed differences in housing price and quantity dynamics across properties that differ in both their spatial relationship to wild fire events (views vs. proximity) and their latent risk for wildfire.

Suggested Citation

  • Shawn J. McCoy & Randall P. Walsh, 2014. "W.U.I. on Fire: Risk, Salience & Housing Demand," NBER Working Papers 20644, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:20644
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    Cited by:

    1. Tanner, Sophia & Garnache, Cloe, 2017. "The Cost of Wildfires in Heavily Urbanized Areas: A Hedonic Approach," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 259167, Agricultural and Applied Economics Association.
    2. Wibbenmeyer, Matthew & Anderson, Sarah & Plantinga, Andrew J., 2020. "Inequality in Agency Responsiveness: Evidence from Salient Wildfire Events," RFF Working Paper Series 20-22, Resources for the Future.
    3. Fekrazad, Amir, 2019. "Earthquake-risk salience and housing prices: Evidence from California," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 78(C), pages 104-113.

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    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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