Risk Preferences, Risk Perceptions, and Demand for Flood Insurance
46 Pages Posted: 17 May 2011 Last revised: 29 May 2013
Date Written: June 13, 2012
We combine household-level data on the choice to purchase flood insurance with experiment-based risk preference data and subjective risk perception data. The sample covers a wide geographic area (the entire U.S. Gulf Coast and Florida’s Atlantic Coast) and includes individuals exposed to varying levels of risk. This work represents one of very few analyses to do so. Results indicate that our experiment-based measure of risk aversion over the loss domain positively and significantly correlates with the decision to purchase a flood policy, as do perceived expectations of hurricane damage, eligibility for disaster assistance, and credibility of insurance providers.
Keywords: flood insurance, Gulf Coast, risk preference, risk perception, survey
JEL Classification: D81, Q20
Suggested Citation: Suggested Citation