NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Laura A. Bakkensen

University of Arizona
School of Government & Public Policy
315 Social Science
P.O. Box 210027
Tucson, AZ 85721-0027

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org

NBER Working Papers and Publications

September 2017Flood Risk Belief Heterogeneity and Coastal Home Price Dynamics: Going Under Water?
with Lint Barrage: w23854
How will climate risk beliefs affect coastal housing market dynamics? This paper provides both theoretical and empirical evidence: First, we build a dynamic housing market model with heterogeneity in home types, consumer preferences, and flood risk beliefs. The model incorporates a Bayesian learning mechanism allowing agents to update their beliefs depending on whether flood events occur. Second, to quantify these elements, we implement a door-to-door survey campaign in Rhode Island. The results confirm significant heterogeneity in flood risk beliefs, and that selection into coastal homes is driven by both lower risk perceptions and higher coastal amenity values. Third, we calibrate the model to simulate coastal home price trajectories given a future flood risk increase and policy reform a...
 
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