Estimating the Indirect Cost of Floods: Evidence from High-Tide Flooding

36 Pages Posted: 14 Jul 2023

See all articles by Seunghoon Lee

Seunghoon Lee

Massachusetts Institute of Technology (MIT)

Xibo Wan

Massachusetts Institute of Technology (MIT)

Siqi Zheng

Samuel Talk Lee Professor of Urban and Real Estate Sustainability, Faculty Director of MIT Center for Real Estate

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%.

Suggested Citation

Lee, Seunghoon and Wan, Xibo and Zheng, Siqi, Estimating the Indirect Cost of Floods: Evidence from High-Tide Flooding (July 11, 2023). MIT Center for Real Estate Research Paper No. 23/10, Available at SSRN: https://ssrn.com/abstract=4506951 or http://dx.doi.org/10.2139/ssrn.4506951

Seunghoon Lee (Contact Author)

Massachusetts Institute of Technology (MIT)

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Xibo Wan

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Siqi Zheng

Samuel Talk Lee Professor of Urban and Real Estate Sustainability, Faculty Director of MIT Center for Real Estate ( email )

Building 9-323
Cambridge, MA 02139
United States

HOME PAGE: http://https://siqizheng.mit.edu/

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