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Evaluating the Impact of Floods on Housing Price Using a Spatial Matching Difference-In-Differences (SM-DID) Approach

Author

Listed:
  • Jean Dubé

    (École supérieure d’aménagement du territoire et de développement régional (ESAD), Université Laval, Québec, QC G1V 0A6, Canada)

  • Maha AbdelHalim

    (INRS-UCS, Montréal, QC H2X 1E3, Canada)

  • Nicolas Devaux

    (UQAR, Rimouski, QC G5L 3A1, Canada)

Abstract

Many applications have relied on the hedonic pricing model (HPM) to measure the willingness-to-pay (WTP) for urban externalities and natural disasters. The classic HPM regresses housing price on a complete list of attributes/characteristics that include spatial or environmental amenities (or disamenities), such as floods, to retrieve the gradients of the market (marginal) WTP for such externalities. The aim of this paper is to propose an innovative methodological framework that extends the causal relations based on a spatial matching difference-in-differences (SM-DID) estimator, and which attempts to calculate the difference between sale price for similar goods within “treated” and “control” groups. To demonstrate the potential of the proposed spatial matching method, the researchers present an empirical investigation based on the case of a flood event recorded in the city of Laval (Québec, Canada) in 1998, using information on transactions occurring between 1995 and 2001. The research results show that the impact of flooding brings a negative premium on the housing price of about 20,000$ Canadian (CAN).

Suggested Citation

  • Jean Dubé & Maha AbdelHalim & Nicolas Devaux, 2021. "Evaluating the Impact of Floods on Housing Price Using a Spatial Matching Difference-In-Differences (SM-DID) Approach," Sustainability, MDPI, vol. 13(2), pages 1-15, January.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:2:p:804-:d:480956
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    References listed on IDEAS

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    Cited by:

    1. Paolo Avner & Vincent Viguié & Bramka Arga Jafino & Stephane Hallegatte, 2022. "Flood Protection and Land Value Creation – Not all Resilience Investments Are Created Equal," Economics of Disasters and Climate Change, Springer, vol. 6(3), pages 417-449, November.
    2. Bandyopadhyay, Sumana & Bandyopadhya, Sunando & Dasgupta, Susmita & Mallik, Chinmoyee & Wheeler, David, 2022. "Discounting Disaster: Land Markets and Climate Change in the Indian Sundarbans," Ecology, Economy and Society - the INSEE Journal, Indian Society of Ecological Economics (INSEE), vol. 5(02), July.
    3. Sidong Zhao & Kaixu Zhao & Ping Zhang, 2021. "Spatial Inequality in China’s Housing Market and the Driving Mechanism," Land, MDPI, vol. 10(8), pages 1-33, August.
    4. Demidova, Olga, 2021. "Methods of spatial econometrics and evaluation of government programs effectiveness," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 64, pages 107-134.
    5. Maha AbdelHalim & Jean Dubé & Nicolas Devaux, 2021. "The Spatial and Temporal Decomposition of the Effect of Floods on Single-Family House Prices: A Laval, Canada Case Study," Sustainability, MDPI, vol. 13(9), pages 1-18, May.

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