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FLOODING RISK AND HOUSING VALUES: AN ECONOMIC ASSESSMENT OF ENVIRONMENTAL HAZARD

Vanessa Daniel, Raymond Florax and Piet Rietveld

No 7333, Working papers from Purdue University, Department of Agricultural Economics

Abstract: Climate change, the ‘boom and bust’ cycles of rivers, and altered water resource management practice have caused significant changes in the spatial distribution of the risk of flooding. Hedonic pricing studies, predominantly for the US, have assessed the spatial incidence of risk and the associated implicit price of flooding risk. Using these implicit price estimates and their associated standard errors, we perform a meta-analysis and find that houses located in the 100-year floodplain have a –0.3 to –0.8% lower price. The actual occurrence of a flooding event or increased stringency in disclosure rules causes ex ante prices to differ from ex post prices, but these effects are small. The marginal willingness to pay for reduced risk exposure has increased over time, and it is slightly lower for areas with a higher per capita income. We show that obfuscating amenity effects and risk exposure associated with proximity to water causes systematic bias in the implicit price of flooding risk.

Keywords: Environmental Economics and Policy; Land Economics/Use (search for similar items in EconPapers)
Date: 2007
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http://ageconsearch.umn.edu/record/7333/files/wp070002.pdf (application/pdf)

Related works:
Journal Article: Flooding risk and housing values: An economic assessment of environmental hazard (2009) Downloads
Working Paper: FLOODING RISK AND HOUSING VALUES: AN ECONOMIC ASSESSMENT OF ENVIRONMENTAL HAZARD (2007) Downloads
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