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Estimating the Flood Risk Discount: Evidence From a One-off National Information Shock

Author

Listed:
  • Tom Gillespie

    (University of Galway)

  • Ronan C. Lyons

    (Trinity College Dublin, and Centre for Economics, Policy & History (CEPH))

  • Thomas K. J. McDermott

    (University of Galway)

Abstract

Flood risk is a highly pervasive and costly natural hazard globally. With significant increases in flood risk expected over coming decades, future exposure to flood risk and associated costs will depend heavily on how private consumption decisions respond to new information about risk. We exploit a one-off national information treatment in the form of the release in 2011, for the first time, of detailed flood risk maps for Ireland, to test the effect of new information about flood risk on housing prices across a national housing market. We combine rich dwelling-level information on over 475,000 dwellings for the period 2006-2015 with detailed official data relating to flood risk, events and defences. Our core finding is that information matters. The price of housing responded clearly to the release of flood risk maps at the end of 2011, with the emergence of a 4% price discount for dwellings at risk of flooding.

Suggested Citation

  • Tom Gillespie & Ronan C. Lyons & Thomas K. J. McDermott, 2025. "Estimating the Flood Risk Discount: Evidence From a One-off National Information Shock," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 88(5), pages 1195-1212, May.
    • Handle: RePEc:kap:enreec:v:88:y:2025:i:5:d:10.1007_s10640-025-00963-5
    DOI: 10.1007/s10640-025-00963-5
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    More about this item

    Keywords

    Flood hazards; Hedonic prices; Urban planning; Information updating; Risk assessments;
    All these keywords.

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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