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Valuing Mitigation: Real Estate Market Response to Hurricane Loss Reduction Measures

  • Kevin M. Simmons

    ()

    (Department of Economics, Oklahoma City University)

  • Jamie Brown Kruse

    ()

    (Department of Economics, Texas Tech University)

  • Douglas A. Smith

    ()

    (Department of Civil Engineering, Texas Tech University)

Registered author(s):

    This paper explores valuation of two measures of windstorm mitigation in a Gulf Coast city. Since the home owner is not able to reduce the probability that a hurricane or tropical storm will occur at the structure's location, any voluntary mitigation intended to fortify the home is a form of self-insurance as defined by. This distinction is important because market insurance and self-insurance are substitutes and thus subject to the standard moral hazard problem. Using a unique Multiple Listing Service data set with detailed information on several hurricane mitigation features, we construct two models to test the influence of mitigation on resale price. The results of the hedonic study indicate that individuals place a positive value on a self-insurance type of mitigation.

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    Article provided by Southern Economic Association in its journal Southern Economic Journal.

    Volume (Year): 68 (2002)
    Issue (Month): 3 (January)
    Pages: 660-671

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    Handle: RePEc:sej:ancoec:v:68:3:y:2002:p:660-671
    Contact details of provider: Web page: http://www.southerneconomic.org/

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