Housing, Natural Hazards, and Insurance
Posted: 28 Sep 2011
Date Written: July 8, 1997
Abstract
This paper describes residential development and location choice within a community subject to future natural hazards of uncertain severity. This is accomplished by constructing an equilibrium model of housing markets where locations are differentiated by both risk of loss due to natural hazards and distance from a central business district. In this context, households trade-off location and risk amenities, allowing for the possibility that areas within the outer boundary of the community will be left undeveloped in equilibrium. General equilibrium comparative statics are derived in economies both with and without insurance. Emphasis is placed on describing the impact of variables such as population and income on the development of hazardous areas.
Keywords: Housing, Housing rent, Natural hazards
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