The existing literature focuses on how perceived flood risk affects house value. Search theory, however, implies that flood risks will be capitalized into both house price and liquidity. This article draws on search theory to develop an empirical approach for estimating flood risk capitalization into both price and selling time. The results show the mix of price and liquidity capitalization varies by level of flood risk as well as across housing market phases. Regardless of the specific capitalization pattern, the results illustrate that focusing solely on price without allowing for concomitant liquidity capitalization can yield estimates that understate the full impact of flood risk on house transactions.
Between 1945 and 2007, the U.S. lost 19.3 percent of its agricultural land. Over the same time period, the construction of the 42,500 mile interstate highway system lowered transportation costs and opened large tracts of land for development. This paper assesses the impact of the interstate highway system on agricultural land loss in Georgia, and uses the empirical estimates to simulate agricultural land loss resulting from the construction of additional interstate highways. Using a historical dataset of agricultural land and interstate highway mileage, empirical estimates indicate that each additional mile of interstate highway reduces agricultural land by 468 acres. The impact of interstate highways is heterogeneous across initial level of county development. Urban counties convert seventy percent more land than the full sample estimates. Simulation results show that additions to the intestate system create further loss of agricultural land. The results imply that future conservation programs need to consider how to mitigate the impact of the interstate highway system.
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