Weather Shocks, Population, and Housing Prices: the Role of Expectation Revisions

Ivan Petkov

Economics of Disasters and Climate Change, 2022, vol. 6, issue 3, No 4, 495-540

Abstract: Abstract I provide new evidence about the information content of weather shocks in the US coastal states, based on substantial hurricane impacts, with a quasi-experimental research design that matches counties by risk, size, and income. I examine if hurricanes represent “new news” in counties with no prior hurricanes and if expectations updating is reflected in population and house price growth. I develop a measure reflecting homeowners’ flood risk expectation based on flood insurance deductible data, which assumes that higher deductibles reveal lower flood expectations. I find that population growth declines more in counties without previous hurricanes and that this is driven by areas with lower flood-risk priors, consistent with updating when the hurricane is more likely to be “new news”. This is supported by within-county evidence that directly controls for hurricane losses and residents’ priors. I find that information updating actually increases house price growth in impacted counties with no previous hurricanes.

Keywords: Migration; Population; Expectation revisions; Climate change (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s41885-022-00116-8

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