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The Impact of Hurricanes on Housing Prices: Evidence from US Coastal Cities

  • Murphy, Anthony
  • Strobl, Eric

We investigate the effect of hurricane strikes on housing prices in US coastal cities. To this end, we construct a new index of hurricane destruction which varies over time and space. Using this index and an annual, two equation, dynamic equilibrium correction panel model with area and time fixed effects, we model the effects of hurricanes on real house process and real incomes. In our model hurricanes have a direct effect on house prices and an indirect effect via a fall in local incomes. Our results show that the typical hurricane strike raises real house prices for a number of years, with a maximum effect of between 3 to 4% three years after occurrence. There is also a small negative effect on real incomes. These results are stable across models and sub-samples.

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File URL: http://mpra.ub.uni-muenchen.de/19353/3/MPRA_paper_19353.pdf
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File URL: http://mpra.ub.uni-muenchen.de/19360/3/MPRA_paper_19360.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 19353.

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Date of creation: 15 Dec 2009
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Handle: RePEc:pra:mprapa:19353
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  1. Choi, In, 2001. "Unit root tests for panel data," Journal of International Money and Finance, Elsevier, vol. 20(2), pages 249-272, April.
  2. Hallstrom, Daniel G. & Smith, V. Kerry, 2005. "Market responses to hurricanes," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 541-561, November.
  3. Speyrer, Janet Furman & Ragas, Wade R, 1991. "Housing Prices and Flood Risk: An Examination Using Spline Regression," The Journal of Real Estate Finance and Economics, Springer, vol. 4(4), pages 395-407, December.
  4. Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-52, Special I.
  5. Kaddour Hadri, 1999. "Testing For Stationarity In Heterogeneous Panel Data," Research Papers 1999_04, University of Liverpool Management School.
  6. William D. Nordhaus, 2006. "The Economics of Hurricanes in the United States," NBER Working Papers 12813, National Bureau of Economic Research, Inc.
  7. Ariel R. Belasen & Solomon W. Polachek, 2008. "How Hurricanes Affect Wages and Employment in Local Labor Markets," American Economic Review, American Economic Association, vol. 98(2), pages 49-53, May.
  8. Stephen Malpezzi, 1998. "A Simple Error Correction Model of House Prices," Wisconsin-Madison CULER working papers 98-11, University of Wisconsin Center for Urban Land Economic Research.
  9. Okmyung Biny & Stephen Polasky, 2004. "Effects of Flood Hazards on Property Values: Evidence Before and After Hurricane Floyd," Land Economics, University of Wisconsin Press, vol. 80(4).
  10. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
  11. Jared Carbone & Daniel Hallstrom & V. Smith, 2006. "Can Natural Experiments Measure Behavioral Responses to Environmental Risks?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 33(3), pages 273-297, 03.
  12. Joshua Gallin, 2006. "The Long-Run Relationship between House Prices and Income: Evidence from Local Housing Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 34(3), pages 417-438, 09.
  13. Strobl, Eric, 2008. "The Economic Growth Impact of Hurricanes: Evidence from US Coastal Counties," IZA Discussion Papers 3619, Institute for the Study of Labor (IZA).
  14. repec:cup:cbooks:9780521898010 is not listed on IDEAS
  15. Dakshina Silva & Jamie Kruse & Yongsheng Wang, 2008. "Spatial dependencies in wind-related housing damage," Natural Hazards, International Society for the Prevention and Mitigation of Natural Hazards, vol. 47(3), pages 317-330, December.
  16. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
  17. repec:cup:cbooks:9780521725200 is not listed on IDEAS
  18. Ewing Bradley T. & Kruse Jamie Brown & Sutter Daniel, 2009. "An Overview of Hurricane Katrina and Economic Loss," Journal of Business Valuation and Economic Loss Analysis, De Gruyter, vol. 4(2), pages 1-14, April.
  19. Jacob Vigdor, 2008. "The Economic Aftermath of Hurricane Katrina," Journal of Economic Perspectives, American Economic Association, vol. 22(4), pages 135-54, Fall.
  20. Dennis R. Capozza & Patric H. Hendershott & Charlotte Mack, 2004. "An Anatomy of Price Dynamics in Illiquid Markets: Analysis and Evidence from Local Housing Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 32(1), pages 1-32, 03.
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