Putting a Price on Safety : A Hedonic Price Approach to Flood Risk in African Cities
This paper uses a hedonic property price function to estimate the relationship between flood risk and rents in four Sub-Saharan Africa cities: Accra, Antananarivo, Dar es Salaam, and Addis Ababa. The analysis relies on household survey data collect...
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| Language: | English |
| Published: |
World Bank, Washington, DC
2022
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| Online Access: | http://documents.worldbank.org/curated/en/099947307212239604/IDU0b6fb06980cadc0453908efb0daf3293b3149 http://hdl.handle.net/10986/37754 |
| Summary: | This paper uses a hedonic property
price function to estimate the relationship between flood
risk and rents in four Sub-Saharan Africa cities: Accra,
Antananarivo, Dar es Salaam, and Addis Ababa. The analysis
relies on household survey data collected after flood events
in the cities. Flood risk is measured with self-reported
data on past flood exposure and perception of future risk of
flooding of households. The study finds that flood risk is
associated with lower rents in Accra, Antananarivo, Dar es
Salaam, and Addis Ababa, ranging from 14 to 56 percent
lower. In contrast, risk is associated with higher rent in
Dar es Salaam, which could be potentially attributed to a
combination of lack of awareness of flood risk among
renters, high transaction costs and omitted variable bias.
For example, only 12 percent of households living in
flood-prone areas were aware of the flood risk when they
moved in. In Antananarivo, job density is associated with
higher rents while in Accra and Addis Ababa, higher job
density is associated with lower rents. Results are negative
but not significant in Dar es Salaam. When interacting job
density with flood risk for each city, the negative effect
of job density on rents is higher (in absolute value) when
flood risk is high in Accra and Addis Ababa, and the
positive effect of job density on rents becomes negative
when flood risk is high in Antananarivo. This relationship
is not found in Dar es Salaam. The finding seems to suggest
that access to jobs is an important factor driving people to
settle in flood-prone areas. |
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