The Adverse Economic Effects Of Coastal Flooding

Sea level rise and increases in the frequency and severity of coastal flooding (linked to global warming) pose a major threat to the physical and ecological infrastructures in coastal communities (Airoldi et al. 2005; Barbier et al. 2011; Filatova 2014; Pryce and Chen 2011). It is claimed that the adverse economic impacts of flooding (both riverine and coastal) in the U.S are higher than any other natural hazard (Pope 2008). Until recently, however, focus (within the economic literature) has been largely placed on the economic losses associated with flood damage to residential property and other built infrastructures. This focus was at the expense of the natural assets (such as coastal wetlands and beaches) that provide diverse benefits whose …show more content…
Bin et al. 2008a; Bin et al. 2008b; Bin and Polasky 2008; MacDonald et al. 1990; Pope 2008; Shabman and Stephenson 1996 and Simons et al. 2002). According to this method, values for risk reductions are inferred by observing price differentials associated with variations in levels of vulnerability to flood risk using several measures, such as flood-zone designation and past experience with flooding. An advantage of this approach (as one of the so called revealed preference [RP] methods) is that it makes use of actual market transactions to infer the value of reductions in floor-caused risks. However, its underlying assumptions have been questioned. For example, one unrealistic assumption that underlies this method is that the value of flood-risk reduction is constant across individuals and over quantity of flood reduction (Pryce and Chen 2011). Furthermore, this method does not account for non-monetary costs and captures use values only (MacDonald et al. …show more content…
That is, the commodity under valuation is mostly a private good intended to reduce the negative impacts of flooding on respondent’ personal belonging or private property. This private good is frequently represented by flood insurance, and the choice alternatives vary in terms of attributes that include flood probability, coverage and the cost of insurance (Botzen et al. 2012; Brouwer and Schaafsma 2013). Even when the hypothetical good is publicly provided, as in Nguyen (2013), the stated objective of the provision is to reduce the direct effects of flooding on the personal and material levels (reduced damage to homes, reduced damage to agricultural production and reduction in fatality