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Climate Risk and Beliefs in New York Floodplains

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  • Matthew Gibson
  • Jamie T. Mullins

Abstract

Applying a difference-in-differences framework to a census of residential property transactions in New York City 2003–17, 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% 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.

Suggested Citation

  • Matthew Gibson & Jamie T. Mullins, 2020. "Climate Risk and Beliefs in New York Floodplains," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 7(6), pages 1069-1111.
    • Handle: RePEc:ucp:jaerec:doi:10.1086/710240
    DOI: 10.1086/710240
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    More about this item

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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