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Publication Date
22 November 2023

The Effect of Natural Disasters and Extreme Weather on Household Location Choice and Economic Welfare



Natural disasters have increased in the U.S. in recent decades. At the same time, there has been a shift in population away from the states in the Northeast and Midwest to areas in the Sunbelt, many of which face increased risks from natural disasters. Spatial equilibrium theory predicts that households trade off risk for income in making location decisions. We estimate a spatial equilibrium model of household location choice to understand these trade-offs. Our results show that households require as much as 0.40% of annual household income to endure an additional disaster over the course of a decade. We also show that these values differ substantially depending on household skill level with higher-skill, higher-income households willing to pay three times more in annual income to avoid an additional natural disaster. Our results have important implications for policymakers thinking about climate change adaptation and environmental justice. 

Wrenn, Douglas Harvey. 2023. “The Effect Of Natural Disasters And Extreme Weather On Household Location Choice And Economic Welfare”. Journal Of The Association Of Environmental And Resource Economists. University of Chicago Press. doi:10.1086/728887.
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