Climate Change and Natural Disasters: Losses and Policies
Paper Session
Saturday, Jan. 4, 2025 10:15 AM - 12:15 PM (PST)
- Chair: Adrien Bilal, Harvard University
The Effects of Floodplain Regulation on Housing Markets
Abstract
We investigate the effects of regulation designed to align privately- and socially-optimal construction in areas at risk of flooding in Florida. Using a spatial regression discontinuity around regulatory boundaries and an event study around the policy’s introduction, we document that floodplain regulation reduces construction in high-risk areas and mitigates damages of at-risk homes. Embedding these effects in a model of the housing market, we find the policy reduces damages to the socially-efficient level, but incurs higher costs than a first-best corrective tax. Improved targeting of the existing policy achieves 79% of first-best welfare gains, or $7,041 per newly-constructed house.Urban Policy and Spatial Exposure to Environmental Risk
Abstract
In the past two decades, about half of the new homes in the United States were built in environmentally risky areas. Why is new residential development being exposed to such risk? I posit that land-use regulations restricting development in safer areas contribute to this pattern. I study this question in the context of exposure to wildfire risk in the metropolitan area of San Diego, California, where areas unexposed to risk are highly regulated and built out. I estimate a quantitative urban model using detailed spatial data on zoning, density limits, lot size restrictions, wildfire risk, and insurance. In the model, the regulations benefit landowners and reallocate the population to unregulated at-risk areas. These effects depend on estimated disamenities from wildfire risk, insurance access, and the spatial correlations between regulations, wildfire risk, and location amenities. I find that land-use regulations raise city-level rents by an average 28% and explain 7% of the residents living in fire-prone areas. The estimated present-discounted cost of wildfire risk is $14,149 per person, with existing regulations accounting for 10% of that cost. Over the next 40 years, as wildfire risk intensifies, the population grows, and the current land restrictions become more binding, the number of exposed residents will grow by 12%. The results show that institutions that restrain relocating out of harm’s way, such as land-use regulations, can limit adaptation to climate change.The Effects and Effectiveness of Emergency Price Controls During Natural Disasters
Abstract
This paper considers the efficacy of restricting price increases on essential supplies during natural disasters. We start by documenting patterns in the market for such goods during severe storms and hurricanes in the U.S. We show that sales of critical goods increase sharply in the weeks surrounding a disaster, followed by an elevated incidence of apparent stockouts in subsequent weeks. The average price increase is small, but some retailers impose large price increases relative to those that occur in non-disaster times. In contrast, there are no detectable changes in wholesale prices and modest effects on transportation costs. While existing laws prevent these retail price increases in a majority of U.S. states, we find no evidence that these laws have been enforced. Given this, we estimate a model of retailer behavior to evaluate the potential effects of enforcing such laws. We show that the effects of price restrictions on consumer surplus are ambiguous, and depend on the incidence of stockouts and the costs of procuring additional supply.JEL Classifications
- Q5 - Environmental Economics
- E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook