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Earthquake risk and housing prices in Japan: Evidence before and after massive earthquakes


  • Naoi, Michio
  • Seko, Miki
  • Sumita, Kazuto


The hedonic pricing approach is used to examine whether homeowners and/or renters alter their subjective assessments of earthquake risks after massive earthquakes. Using nation-wide household panel data coupled with earthquake hazard information and records of observed earthquakes, we find that there are some modifications of individuals' assessments of earthquake risk in both cases. We have carefully taken into consideration the bias stemming from the use of objective risk variables as a proxy for individual risk assessments. Our results suggest that the price discount from locating within a quake-prone area is significantly larger soon after earthquake events than beforehand. We argue that the most likely interpretation for this result is that households tend to underestimate earthquake risk if there has not been a recent occurrence.

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  • Naoi, Michio & Seko, Miki & Sumita, Kazuto, 2009. "Earthquake risk and housing prices in Japan: Evidence before and after massive earthquakes," Regional Science and Urban Economics, Elsevier, vol. 39(6), pages 658-669, November.
  • Handle: RePEc:eee:regeco:v:39:y:2009:i:6:p:658-669

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    References listed on IDEAS

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    Cited by:

    1. Xu, Hangtian, 2017. "Spatial Reorganization in Urban Redevelopment: Evidence from an Earthquake in a Metropolitan Area," MPRA Paper 78986, University Library of Munich, Germany.
    2. Miyakoshi, Tatsuyoshi & Shimada, Junji & Li, Kui-Wai, 2016. "The impacts of the 2008 and 2011 crises on the Japan REIT market," Journal of the Japanese and International Economies, Elsevier, vol. 41(C), pages 30-40.
    3. Hans R.A. Koster & Jos N. van Ommeren, 2015. "Natural Gas Extraction, Earthquakes and House Prices," Tinbergen Institute Discussion Papers 15-038/VIII, Tinbergen Institute.
    4. Levente Timar & Arthur Grimes & Richard Fabling, 2014. "That Sinking Feeling: The Changing Price of Disaster Risk Following an Earthquake," Working Papers 14_13, Motu Economic and Public Policy Research.
    5. Liu, Haiyan & Ferreira, Susana & Brewer, Brady, 2016. "The Housing Market Impacts of Wastewater Injection Induced Seismicity Risk," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 236069, Agricultural and Applied Economics Association.
    6. 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.
    7. Arbel, Yuval & Ben-Shahar, Danny & Gabriel, Stuart & Tobol, Yossef, 2010. "The local cost of terror: Effects of the second Palestinian Intifada on Jerusalem house prices," Regional Science and Urban Economics, Elsevier, vol. 40(6), pages 415-426, November.
    8. Michael LaCour-Little & Arsenio Staer, 2016. "Earthquakes and Price Discovery in the Housing Market: Evidence from New Zealand," International Real Estate Review, Asian Real Estate Society, vol. 19(4), pages 493-513.
    9. Tajima, Kayo & Yamamoto, Masashi & Ichinose, Daisuke, 2016. "How do agricultural markets respond to radiation risk? Evidence from the 2011 disaster in Japan," Regional Science and Urban Economics, Elsevier, vol. 60(C), pages 20-30.
    10. Koster, Hans R.A. & Ommeren, Jos van, 2015. "A shaky business: Natural gas extraction, earthquakes and house prices," European Economic Review, Elsevier, vol. 80(C), pages 120-139.
    11. Hayato Nakanishi, 2017. "Quasi-experimental evidence for the importance of accounting for fear when evaluating catastrophic events," Empirical Economics, Springer, vol. 52(2), pages 869-894, March.
    12. James R. Meldrum, 2016. "Floodplain Price Impacts by Property Type in Boulder County, Colorado: Condominiums Versus Standalone Properties," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 64(4), pages 725-750, August.
    13. Levente Timar & Arthur Grimes & Richard Fabling, 2015. "Before a Fall: Impacts of Earthquake Regulation and Building Codes on the Commercial Building Market," Working Papers 15_19, Motu Economic and Public Policy Research.
    14. repec:eee:regeco:v:68:y:2018:i:c:p:172-190 is not listed on IDEAS
    15. Liao, Wen-Chi & Wang, Xizhu, 2012. "Hedonic house prices and spatial quantile regression," Journal of Housing Economics, Elsevier, vol. 21(1), pages 16-27.
    16. Bin, Okmyung & Landry, Craig E., 2013. "Changes in implicit flood risk premiums: Empirical evidence from the housing market," Journal of Environmental Economics and Management, Elsevier, vol. 65(3), pages 361-376.
    17. Michio Naoi & Miki Seko & Takuya Ishino, 2012. "Earthquake Risk in Japan: Consumers' Risk Mitigation Responses After the Great East Japan Earthquake," Journal of Economic Issues, Taylor & Francis Journals, vol. 46(2), pages 519-530.
    18. Serge REY & Jacques JAUSSAUD & Julien MARTINE, 2012. "Japon : pistes pour l’analyse des conséquences économiques et managériales du Grand Tremblement de Terre du 11 mars 2011," Working Papers 2011-2012_9, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Jun 2012.
    19. Gu, Tao & Nakagawa, Masayuki & Saito, Makoto & Yamaga , Hisaki, 2012. "Public perceptions of earthquake risk and its impact on land pricing: The case of the Uemachi fault line in Japan," Discussion Papers 2012-07, Graduate School of Economics, Hitotsubashi University.
    20. Hidano, Noboru & Hoshino, Tadao & Sugiura, Ayako, 2015. "The effect of seismic hazard risk information on property prices: Evidence from a spatial regression discontinuity design," Regional Science and Urban Economics, Elsevier, vol. 53(C), pages 113-122.
    21. Xu, Hangtian, 2016. "Multiple Equilibria in the Urban Spatial Structure: Evidence from the Hanshin Earthquake," MPRA Paper 75219, University Library of Munich, Germany.
    22. Michio Naoi & Miki Seko & Kazuto Sumita, 2010. "Community Rating, Cross Subsidies and Underinsurance: Why so many Households in Japan do not Purchase Earthquake Insurance," The Journal of Real Estate Finance and Economics, Springer, vol. 40(4), pages 544-561, May.
    23. Boes, Stefan & Nüesch, Stephan & Wüthrich, Kaspar, 2015. "Hedonic valuation of the perceived risks of nuclear power plants," Economics Letters, Elsevier, vol. 133(C), pages 109-111.


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