Climate Risk and Beliefs in New York Floodplains

Matthew Gibson and Jamie Mullins ()
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Jamie Mullins: University of Massachusetts Amherst

No 13553, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Applying a difference-in-differences framework to a census of residential property transactions in New York City 2003-2017, we estimate the price effects of three flood risk signals: 1) the Biggert-Waters Flood Insurance Reform Act, which increased premiums; 2) Hurricane Sandy; and 3) new floodplain maps reflecting three decades of climate change. Estimates are negative for all three signals and some are large: properties included in the new floodplain after escaping flooding by Sandy experienced 11 percent price reductions. We investigate possible mechanisms, including selection of properties into the market and residential sorting. Finding no evidence for these, we develop a parsimonious theoretical model that allows decomposition of our reduced-form estimates into the effects of insurance premium changes and belief updating. Results suggest the new maps induced belief changes comparable to those from insurance reform.

Keywords: beliefs; updating; climate change; flood risk (search for similar items in EconPapers)
JEL-codes: G22 Q54 Q58 R30 (search for similar items in EconPapers)
Pages: 89 pages
Date: 2020-07
New Economics Papers: this item is included in nep-env and nep-ias
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Citations: View citations in EconPapers (52)

Published - published as 'Climate risk and beliefs in New York floodplains' in: Journal of the Association of Environmental and Resource Economists, 2020, 7 (6), 1069-1111.

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Journal Article: Climate Risk and Beliefs in New York Floodplains (2020)
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