Estimating the Indirect Cost of Floods: Evidence from High-Tide Flooding
36 Pages Posted: 14 Jul 2023
Date Written: July 11, 2023
Abstract
While a theoretically consistent cost of flooding is a welfare loss from the event, most existing estimates are based on direct and insured damage because of measurement challenges. In this paper, we leverage temporal and spatial variations in the occurrence of High-tide flooding (HTF), highly disruptive, yet rarely destructive small scale coastal flooding, to estimate the indirect cost of flooding. Our analysis reveals that HTF significantly disrupts daily lives, resulting in a 9.0% reduction in the number of trips on the day of HTF. Further, we show that exposure to one additional day of HTF in the past 12 months reduces rental rates by 0.23%, indicating that a lower bound indirect cost of flood is $45 per day. Our findings suggest that omitting disutility from floods underestimates the true cost of floods by 28%.
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