The Spatial and Temporal Decomposition of the Effect of Floods on Single-Family House Prices: A Laval, Canada Case Study

Maha AbdelHalim, Jean Dubé and Nicolas Devaux
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Maha AbdelHalim: INRS, Centre Urbanisation, Culture et Société (UCS), Montréal, QC H2X 1E3, Canada
Nicolas Devaux: Département Sociétés, Territoires et Développement, Université du Québec à Rimouski (UQÀR), Rimouski, QC G5L 3A1, Canada

Sustainability, 2021, vol. 13, issue 9, 1-18

Abstract: This paper aims to estimate and decompose the spatial and temporal effect of a flood event occurring in the city of Laval in 1998 using a hedonic pricing model (HPM) based on a difference-in-differences (DID) estimator. The empirical investigation of the impact of flood as a natural disaster must take into account the fact that the negotiation process between buyers and sellers may well occur before the event. It is argued that the evaluation procedure needs to be adjusted to account for this reality because the estimation of the effects may otherwise be biased and isolate other effects. To test this hypothesis, the study focuses on transactions occurring between (1995 and 2001) and within designated floodplains to adequately isolate and decompose the impact of flood. The original database contains information on 252 single-family houses transactions. The results suggest that the estimation of the impact is time dependent, with a measured negative effect appearing several months after the flood, suggesting that the impact is hard to establish right after the event since transactions, and the final sale price, could have been fixed by negotiations well before the event. The statistical methodological framework of flood research should be adapted to account for the negotiation process occurring prior to the flood event to be able to correctly isolate the impact for the after event. The flooded area also needs to be precisely identified to be able to correctly estimate the flood impact on houses that have faced flood.

Keywords: flood; hedonic pricing model; externalities; environmental disamenities; temporal effect (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 (1)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:13:y:2021:i:9:p:5088-:d:547583

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