How the Change of Risk Announcement on Catastrophic Disaster Affects Property Prices?

Hayato Nakanishi ()
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Hayato Nakanishi: Kyoto University

A chapter in The Economics of the Global Environment, 2016, pp 577-595 from Springer

Abstract: Abstract In this article, we present evidence of the benefits of expected utility that is sensitive to rare events. Specifically, we estimate the treatment effect of reports on rare catastrophic tsunamis by using a land price hedonic approach. To identify this effect, we employed a difference in differences (DD) design. Ordinal expected utility predicts no effect since the probability of catastrophic events is sufficiently small to be ignored. However, the estimation result reveals a significant effect. This implies that ordinal expected utility derived from objective risk distribution may be inappropriate for the economic prediction of rare catastrophic events.

Keywords: Catastrophic risks; Difference in differences; Tsunami; Property market; Hedonic price; Quasi-experiment (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:spr:steccp:978-3-319-31943-8_25

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DOI: 10.1007/978-3-319-31943-8_25

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