IDEAS home Printed from https://ideas.repec.org/a/eee/regeco/v88y2021ics0166046221000399.html
   My bibliography  Save this article

Salience of hazard disclosure and house prices: Evidence from Christchurch, New Zealand

Author

Listed:
  • Huang, Yi

Abstract

The risk from extreme, rare events is hard to assess, possibly due to imperfect information. This paper studies an extreme but often ignored risk, liquefaction. A precise, easily verifiable, and trusted information about land liquefaction hazard, Technical Categories (TCs), was released in October 2011 after the 2010/2011 earthquake sequence (EQS) in Christchurch. This paper evaluates the impact of the provision of TCs on housing prices in Christchurch using housing sales 2005–2018. I find that TC classification caused a persistent price reduction in neighborhoods assessed with the highest future liquefaction risk (TC3). Results from boundary discontinuity design show the immediate sharp price reduction in TC3, relative to TC2, reached 17.7% by the third year after the provision of TC classification, followed by a partial recovery that stabilized around 13%. I also find evidence that even though multiple versions of the liquefaction hazard map were produced between 2001 and 2005, these non-salient updates were irrelevant in periods before and after the 2010/2011 EQS.

Suggested Citation

  • Huang, Yi, 2021. "Salience of hazard disclosure and house prices: Evidence from Christchurch, New Zealand," Regional Science and Urban Economics, Elsevier, vol. 88(C).
  • Handle: RePEc:eee:regeco:v:88:y:2021:i:c:s0166046221000399
    DOI: 10.1016/j.regsciurbeco.2021.103679
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0166046221000399
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.regsciurbeco.2021.103679?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Richard Hornbeck & Daniel Keniston, 2017. "Creative Destruction: Barriers to Urban Growth and the Great Boston Fire of 1872," American Economic Review, American Economic Association, vol. 107(6), pages 1365-1398, June.
    2. Gisela Wachinger & Ortwin Renn & Chloe Begg & Christian Kuhlicke, 2013. "The Risk Perception Paradox—Implications for Governance and Communication of Natural Hazards," Risk Analysis, John Wiley & Sons, vol. 33(6), pages 1049-1065, June.
    3. Kurt J. Beron & James C. Murdoch & Mark A. Thayer & Wim P. M. Vijverberg, 1997. "An Analysis of the Housing Market before and after the 1989 Loma Prieta Earthquake," Land Economics, University of Wisconsin Press, vol. 73(1), pages 101-113.
    4. Singh, Ruchi, 2019. "Seismic risk and house prices: Evidence from earthquake fault zoning," Regional Science and Urban Economics, Elsevier, vol. 75(C), pages 187-209.
    5. 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.
    6. Nakagawa, Masayuki & Saito, Makoto & Yamaga, Hisaki, 2007. "Earthquake risk and housing rents: Evidence from the Tokyo Metropolitan Area," Regional Science and Urban Economics, Elsevier, vol. 37(1), pages 87-99, January.
    7. Brookshire, David S & Thayer. Mark A & Tschirhart, John & Schulze, William D, 1985. "A Test of the Expected Utility Model: Evidence from Earthquake Risks," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 369-389, April.
    8. Masayuki Nakagawa & Makoto Saito & Hisaki Yamaga, 2009. "Earthquake Risks And Land Prices: Evidence From The Tokyo Metropolitan Area," The Japanese Economic Review, Japanese Economic Association, vol. 60(2), pages 208-222, June.
    9. Julian Kozlowski & Laura Veldkamp & Venky Venkateswaran, 2020. "The Tail That Wags the Economy: Beliefs and Persistent Stagnation," Journal of Political Economy, University of Chicago Press, vol. 128(8), pages 2839-2879.
    10. Bernknopf, Richard L. & Brookshire, David S. & Thayer, Mark A., 1990. "Earthquake and volcano hazard notices: An economic evaluation of changes in risk perceptions," Journal of Environmental Economics and Management, Elsevier, vol. 18(1), pages 35-49, January.
    11. H. Spencer Banzhaf, 2021. "Difference-in-Differences Hedonics," Journal of Political Economy, University of Chicago Press, vol. 129(8), pages 2385-2414.
    12. 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.
    13. Sanghoon Lee & Jeffrey Lin, 2018. "Natural Amenities, Neighbourhood Dynamics, and Persistence in the Spatial Distribution of Income," Review of Economic Studies, Oxford University Press, vol. 85(1), pages 663-694.
    14. Matthew Gibson & Jamie T. Mullins, 2020. "Climate Risk and Beliefs in New York Floodplains," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 7(6), pages 1069-1111.
    15. Michael LaCour-Little & Arsenio Staer, 2016. "Earthquakes and Price Discovery in the Housing Market: Evidence from New Zealand," International Real Estate Review, Global Social Science Institute, vol. 19(4), pages 493-513.
    16. Ortega, Francesc & Taṣpınar, Süleyman, 2018. "Rising sea levels and sinking property values: Hurricane Sandy and New York’s housing market," Journal of Urban Economics, Elsevier, vol. 106(C), pages 81-100.
    17. 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.
    18. Attila Ambrus & Erica Field & Robert Gonzalez, 2020. "Loss in the Time of Cholera: Long-Run Impact of a Disease Epidemic on the Urban Landscape," American Economic Review, American Economic Association, vol. 110(2), pages 475-525, February.
    19. 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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Singh, Ruchi, 2019. "Seismic risk and house prices: Evidence from earthquake fault zoning," Regional Science and Urban Economics, Elsevier, vol. 75(C), pages 187-209.
    2. Mizuki Kawabata & Michio Naoi & Shohei Yasuda, 2022. "Earthquake risk reduction and residential land prices in Tokyo," Journal in Spatial Econometrics, Springer, vol. 3(1), pages 1-21, December.
    3. Masako Ikefuji & Roger J. A. Laeven & Jan R. Magnus & Yuan Yue, 2022. "Earthquake Risk Embedded in Property Prices: Evidence From Five Japanese Cities," Journal of the American Statistical Association, Taylor & Francis Journals, vol. 117(537), pages 82-93, January.
    4. Ti-Ching Peng, 2021. "The effect of hazard shock and disclosure information on property and land prices: a machine-learning assessment in the case of Japan," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 41(1), pages 1-32, February.
    5. Ferreira, Susana & Liu, Haiyan & Brewer, Brady, 2018. "The housing market impacts of wastewater injection induced seismicity risk," Journal of Environmental Economics and Management, Elsevier, vol. 92(C), pages 251-269.
    6. Abbie A. Rogers & Fiona L. Dempster & Jacob I. Hawkins & Robert J. Johnston & Peter C. Boxall & John Rolfe & Marit E. Kragt & Michael P. Burton & David J. Pannell, 2019. "Valuing non-market economic impacts from natural hazards," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 99(2), pages 1131-1161, November.
    7. David Wolf & Kenji Takeuchi, 2022. "Who Gives a Dam? Capitalization of Flood Protection in Fukuoka, Japan," Discussion Papers 2203, Graduate School of Economics, Kobe University.
    8. Chien-Yuan Sher & Nai-Wei Chen & Yu-Hsi Liu & Ryan H. Murphy, 2021. "The impact of soil-liquefaction information disclosures on housing prices: evidence from Kaohsiung, Taiwan," The Japanese Economic Review, Springer, vol. 72(2), pages 217-241, April.
    9. Chien-Yuan Sher & Nai-Wei Chen & Yu-Hsi Liu & Ryan H. Murphy, 0. "The impact of soil-liquefaction information disclosures on housing prices: evidence from Kaohsiung, Taiwan," The Japanese Economic Review, Springer, vol. 0, pages 1-25.
    10. Wesley Burnett, J. & Mothorpe, Christopher, 2021. "Human-induced earthquakes, risk salience, and housing values," Resource and Energy Economics, Elsevier, vol. 63(C).
    11. 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.
    12. Agustín Indaco & Francesc Ortega & Süleyman Taṣpınar, 2021. "Hurricanes, flood risk and the economic adaptation of businesses," Journal of Economic Geography, Oxford University Press, vol. 21(4), pages 557-591.
    13. Deng, Guoying & Gan, Li & Hernandez, Manuel A., 2015. "Do natural disasters cause an excessive fear of heights? Evidence from the Wenchuan earthquake," Journal of Urban Economics, Elsevier, vol. 90(C), pages 79-89.
    14. 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.
    15. Ortega, Francesc & Taṣpınar, Süleyman, 2018. "Rising sea levels and sinking property values: Hurricane Sandy and New York’s housing market," Journal of Urban Economics, Elsevier, vol. 106(C), pages 81-100.
    16. 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.
    17. 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.
    18. 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.
    19. 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.
    20. 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.

    More about this item

    Keywords

    Earthquake hazard; Salience; Liquefaction; Housing price;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:regeco:v:88:y:2021:i:c:s0166046221000399. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.elsevier.com/locate/regec .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/regec .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.