Adapting to Natural Disasters through Better Information: Evidence from the Home Seller Disclosure Requirement

Abstract

While flood damage is determined by both flood intensity and population exposure, the US has primarily focused on managing the former, with little success. This paper studies whether easing information friction about flood risk could reduce the exposure and thus flood damage. By exploiting plausibly exogenous variations from the Home Seller Disclosure Requirement, I first show this policy lowers the population in high-risk areas. Further, using a hydrological measure of flood intensity, I find that the policy reduces flood damage by 2.8%. The findings suggest that an information policy could facilitate voluntary adaptation.