Working Paper: NBER ID: w20644
Authors: Shawn J. McCoy; Randall P. Walsh
Abstract: We investigate the effects of wildfires on risk perceptions by quantifying the impact of severe wildfires on housing price and transaction dynamics. Our empirical results are interpreted through the lens of a parsimonious model of sorting between locations that vary in their perceived level of fire risk. The model allows us to infer the evolution of risk perceptions among potential sellers and buyers of properties located in the proximity of large wildfire events. Our empirical analysis is based on a multi-dimensional characterization of the potential linkages between fire events and risk perceptions which incorporates measures of both proximity and burn scar views as well as a properties latent wildfire risk. Our analysis provides a connection between changes in underlying risk perceptions and the observed differences in housing price and quantity dynamics across properties that differ in both their spatial relationship to wild fire events (views vs. proximity) and their latent risk for wildfire.
Keywords: wildfires; risk perceptions; housing prices; transaction dynamics
JEL Codes: H23; Q51; R31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Heightened risk perceptions (D81) | Home prices in properties located within a 2km ring of a wildfire (R31) |
| Heightened risk perceptions (D81) | Home prices with a view of a burn scar (R31) |
| Heightened risk perceptions (D81) | Home prices in high latent risk zones (R31) |
| Wildfires (Q54) | Home prices in properties located within a 2km ring of a wildfire (R31) |
| Wildfires (Q54) | Home prices with a view of a burn scar (R31) |
| Wildfires (Q54) | Home prices in high latent risk zones (R31) |
| Wildfires (Q54) | Transaction likelihood in high latent risk zones (E44) |