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Housing Market Response to 2012 Northern Italy Earthquake: The role of house quality and changing risk perception

Author

Listed:
  • Marco Modica

    (IRCrES-CNR, Milano, Italy.)

  • Roberto Zoboli

    (IRCrES-CNR, Milano, Italy; Catholic University of Sacred Heart, Milano, Italy.)

  • Fabrizio Meroni

    (INGV, Milano, Italy)

  • Vera Pessina

    (INGV, Milano, Italy)

  • Thea Squarcina

    (INGV, Milano, Italy)

  • Mario Locati

    (INGV, Milano, Italy)

Abstract

This paper examines the housing market response to Northern Italy earthquake in May 2012. Available literature provides evidence of a drop in the average price of houses after a disaster mainly due to i) underestimation by households of disaster risk in area where its occurrence is low or ii) overreaction because of a higher risk perception triggered by the unforeseen extreme event. Here, we provide evidence that overreaction can play a significant role. We use the Northern Italy earthquake as an experiment that permits to estimate the response of housing value to the extreme event by means of a diff-in-diff models. Differently from other papers, we directly carry out the assessment of the damage earthquake scenario, by using macroseismic methods to evaluate the physical damage level of the Northern Italy earthquake. In this way we are able to compare different damage scenarios and providing information on subjective perception of risk. Moreover, to our knowledge, this is the first work providing evidence that the quality of the houses in relation to the ‘resistance to the tremor’ might also play a relevant role for subjective risk assessment.

Suggested Citation

  • Marco Modica & Roberto Zoboli & Fabrizio Meroni & Vera Pessina & Thea Squarcina & Mario Locati, 2016. "Housing Market Response to 2012 Northern Italy Earthquake: The role of house quality and changing risk perception," SEEDS Working Papers 0416, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised Apr 2016.
  • Handle: RePEc:srt:wpaper:0416
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    References listed on IDEAS

    as
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    Cited by:

    1. Alessio D’Amato & Giovanni Marin & Andrea Rampa, 2019. "Environmental Disasters and Electoral Cycle: An Empirical Analysis on Floods and Landslides in Italy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(2), pages 625-651, October.
    2. Modica, Marco, 2017. "Does the construction of biogas plants affect local property values?," Economics Letters, Elsevier, vol. 159(C), pages 169-172.

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    More about this item

    Keywords

    Earthquake risk; Housing market; Risk perception;
    All these keywords.

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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