Publication

Nether Lands: Evidence on the Price and Perception of Rare Natural Disasters

Garretsen, J., Marlet, G., Bosker, M. & van Woerkens, C., Apr-2019, In : Journal of the European Economic Association. 17, 2, p. 413-453 41 p.

Research output: Contribution to journalArticleAcademicpeer-review

This paper provides evidence on the price and perception of rare natural disasters. We exploit a unique, spatially extremely detailed, dataset on predicted flood water levels in the Netherlands. This dataset, in combination with information on the universe of home sales over the period 1999-2011, allows us to identify people's willingness to pay to avoid flood risk using a border discontinuity design. We find that house prices are on average 1% lower in places that are at risk of flooding. This flood risk discount is more pronounced in neighborhoods with higher predicted flood water levels. Our estimates imply that average perceived flood risk in the Netherlands is much higher than the official protection levels at which the government claims to uphold the country's flood defenses. People expect a flood to happen at least once every 100 years. Depending on the predicted flood water level in their neighborhood, people in flood prone areas are willing to pay 9%-36% more for their flood protection than what the Dutch government currently spends on it.

Original languageEnglish
Pages (from-to)413-453
Number of pages41
JournalJournal of the European Economic Association
Volume17
Issue number2
Publication statusPublished - Apr-2019

    Keywords

  • IMPLICIT MARKETS, HEDONIC PRICES, SCHOOL QUALITY, RISK-AVERSION, EARTHQUAKE, DEMAND, MATTER, MODEL

ID: 55301928