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Flood risk perception after indirect flooding experience: Null results in the German housing market

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  • aus dem Moore, Nils
  • Brehm, Johannes
  • Breidenbach, Philipp
  • Ghosh, Arijit
  • Gruhl, Henri

Abstract

The frequency and severity of fluvial floods are expected to increase due to climate change. This paper investigates whether flood risk perception in the housing market changes across a country after the occurrence of a catastrophic fluvial flood. Using a comprehensive geocoded German house price data set and official flood risk maps, we exploit the July 2021 fluvial flood that was salient across Germany as an exogenous variation to causally measure the flood risk valuation update in a difference-in-differences setup. While we find that house prices decreased in the most inundated regions, no price changes occurred in flood risk regions that were not directly affected. This finding indicates that people did not update their risk perception after indirect exposure. With this paper, we contribute to the understanding of the impact of a salient flood on flood risk capitalization in places without direct exposure.

Suggested Citation

  • aus dem Moore, Nils & Brehm, Johannes & Breidenbach, Philipp & Ghosh, Arijit & Gruhl, Henri, 2022. "Flood risk perception after indirect flooding experience: Null results in the German housing market," Ruhr Economic Papers 976, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    • Handle: RePEc:zbw:rwirep:976
    DOI: 10.4419/96973141
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    More about this item

    Keywords

    Flood risk; home prices; risk updating;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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