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Flooding Risk And Housing Values: An Economic Assessment Of Environmental Hazard

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  • Vanessa E. Daniel

    ()
    (Department of Spatial Economics, Vrije Universiteit)

  • Raymond J.G.M. Florax

    ()
    (Department of Agricultural Economics, Purdue University)

  • Piet Rietveld

    ()
    (Department of Spatial Economics, Vrije Universiteit)

Abstract

Climate change, the ‘boom and bust’ cycles of rivers, and altered water resource management practice have caused significant changes in the spatial distribution of the risk of flooding. Hedonic pricing studies, predominantly for the US, have assessed the spatial incidence of risk and the associated implicit price of flooding risk. Using these implicit price estimates and their associated standard errors, we perform a meta-analysis and find that houses located in the 100-year floodplain have a –0.3 to –0.8% lower price. The actual occurrence of a flooding event or increased stringency in disclosure rules causes ex ante prices to differ from ex post prices, but these effects are small. The marginal willingness to pay for reduced risk exposure has increased over time, and it is slightly lower for areas with a higher per capita income. We show that obfuscating amenity effects and risk exposure associated with proximity to water causes systematic bias in the implicit price of flooding risk.

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Bibliographic Info

Paper provided by Purdue University, College of Agriculture, Department of Agricultural Economics in its series Working Papers with number 07-02.

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Length: 26 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:pae:wpaper:07-02

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Keywords: Manufactured Housing; valuation; environmental risk; meta-analysis; hedonic pricing;

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References

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Citations

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Cited by:
  1. Marija Bockarjova & Piet Rietveld & Erik T. Verhoef, 2012. "Composite Valuation of Immaterial Damage in Flooding: Value of Statistical Life, Value of Statistical Evacuation and Value of Statistical Injury," Tinbergen Institute Discussion Papers 12-047/3, Tinbergen Institute.
  2. Veronesi, Marcella & Chawla, Fabienne & Maurer, Max & Lienert, Judit, 2014. "Climate change and the willingness to pay to reduce ecological and health risks from wastewater flooding in urban centers and the environment," Ecological Economics, Elsevier, Elsevier, vol. 98(C), pages 1-10.
  3. Kousky, Carolyn & Walls, Margaret, 2013. "Floodplain Conservation as a Flood Mitigation Strategy: Examining Costs and Benefits," Discussion Papers, Resources For the Future dp-13-22-rev, Resources For the Future.
  4. Bark, R.H. & Osgood, D.E. & Colby, B.G. & Katz, G. & Stromberg, J., 2009. "Habitat preservation and restoration: Do homebuyers have preferences for quality habitat?," Ecological Economics, Elsevier, Elsevier, vol. 68(5), pages 1465-1475, March.
  5. Alicia Rambaldi & Ryan McAllister & Kerry Collins & Cameron Fletcher, 2011. "Housing shadow prices in an inundation prone suburb," Discussion Papers Series 429, School of Economics, University of Queensland, Australia.
  6. Jon Nelson & Peter Kennedy, 2009. "The Use (and Abuse) of Meta-Analysis in Environmental and Natural Resource Economics: An Assessment," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 42(3), pages 345-377, March.
  7. Marija Bockarjova & Piet Rietveld & Erik T. Verhoef, 2012. "Composite Valuation of Immaterial Damage in Flooding: Value of Statistical Life, Value of Statistical Evacuation and Value of Statistical Injury," Tinbergen Institute Discussion Papers 12-047/3, Tinbergen Institute.
  8. Rickman, Dan S., 2014. "Assessing Regional Quality of Life: A Call for Action in Regional Science," MPRA Paper 58109, University Library of Munich, Germany.

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