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Adapting to Natural Disasters through Better Information: Evidence from the Home Seller Disclosure Requirement

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Abstract

While flood damage is determined by both flood intensity and population exposure, the US has predominantly focused on managing the former, with limited success. This paper studies whether a Home Seller Disclosure Requirement can reduce flood exposure and thus flood damage. Leveraging two quasi-experimental variations of the policy, I first show that mandating flood risk disclosure lowers the population living in high-risk areas. Further, using a hydrological measure of flood intensity, I find that it reduces the probability of flood damage by 31 percent. These findings illustrate that easing information frictions can promote voluntary adaptation to natural disasters.

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  • Seunghoon Lee, "undated". "Adapting to Natural Disasters through Better Information: Evidence from the Home Seller Disclosure Requirement," Working Papers 2402, Department of Economics, University of Missouri.
    • Handle: RePEc:umc:wpaper:2402
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    Keywords

    Natural disaster; Disclosure; Adaptation; Damage function;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • 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
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R28 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Government Policy

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