Evaluating the Impact of Floods on Housing Price Using a Spatial Matching Difference-In-Differences (SM-DID) Approach

Jean Dubé, Maha AbdelHalim and Nicolas Devaux
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Maha AbdelHalim: INRS-UCS, Montréal, QC H2X 1E3, Canada
Nicolas Devaux: UQAR, Rimouski, QC G5L 3A1, Canada

Sustainability, 2021, vol. 13, issue 2, 1-15

Abstract: Many applications have relied on the hedonic pricing model (HPM) to measure the willingness-to-pay (WTP) for urban externalities and natural disasters. The classic HPM regresses housing price on a complete list of attributes/characteristics that include spatial or environmental amenities (or disamenities), such as floods, to retrieve the gradients of the market (marginal) WTP for such externalities. The aim of this paper is to propose an innovative methodological framework that extends the causal relations based on a spatial matching difference-in-differences (SM-DID) estimator, and which attempts to calculate the difference between sale price for similar goods within “treated” and “control” groups. To demonstrate the potential of the proposed spatial matching method, the researchers present an empirical investigation based on the case of a flood event recorded in the city of Laval (Québec, Canada) in 1998, using information on transactions occurring between 1995 and 2001. The research results show that the impact of flooding brings a negative premium on the housing price of about 20,000$ Canadian (CAN).

Keywords: causal inference; matching estimator; real estate market; urban externalities; floods (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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