Social learning about climate risks

Yilan Xu and Sébastien Box‐Couillard

Economic Inquiry, 2024, vol. 62, issue 3, 1172-1191

Abstract: With a social network adjacency matrix constructed from the Facebook Social Connectedness Index (SCI), this paper examines whether social learning facilitates climate risk perception updates to inform climate adaptation. We find that Hurricanes Harvey and Irma‐induced regional flooding increased flood insurance policies nationwide to the extent of each county's social network proximity to the flooded areas, with a corresponding update in climate risk perception. Social learning resulted in an additional 250,000 policies in flooded counties and 81,000 policies in unflooded counties over 3 years. We find evidence of the salience effect but no support for adverse selection or over‐insurance.

Date: 2024
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https://doi.org/10.1111/ecin.13210

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