Flood Risk and Salience: New Evidence from the Sunshine State

Laura A. Bakkensen, Xiaozhou Ding and Lala Ma

Southern Economic Journal, 2019, vol. 85, issue 4, 1132-1158

Abstract: A growing literature finds evidence that flood risk salience varies over time, spiking directly following a flood and then falling off individuals' cognitive radar in the following years. In this article, we provide new evidence of salience exploiting a hurricane cluster impacting Florida that was preceded and followed by periods of unusual calm. Utilizing residential property sales across the state from 2002 through 2012, our main estimate finds a salience impact of −8%, on average. The salience effect persists when we base estimation only on spatial variation in prices to limit confounding from other simultaneous changes due to shifting hedonic equilibria over time. These effects range from housing prices decreases of 5.4–12.3% depending on the year of sale. Understanding flood risk salience has important implications for flood insurance and disaster policy, the benefits transfer literature, and, more broadly, our understanding of natural disaster resilience. JEL Classification: Q51, Q54, R21

Date: 2019
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https://doi.org/10.1002/soej.12327

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Persistent link: https://EconPapers.repec.org/RePEc:wly:soecon:v:85:y:2019:i:4:p:1132-1158

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