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 predominantly focused on managing the former, with limited success. This paper studies whether a Home Seller Disclosure Requirement can reduce flood exposure and thus flood damage. Leveraging two quasi-experimental variations of the policy, I first show that mandating flood risk disclosure lowers the population living in high-risk areas. Further, using a hydrological measure of flood intensity, I find that it reduces the probability of flood damage by 33 percent. These findings illustrate that easing information frictions can promote voluntary adaptation to natural disasters.