Earthquake risk and housing prices in Japan: Evidence before and after massive earthquakes

Michio Naoi, Miki Seko, Kazuto Sumita

Research output: Contribution to journalArticle

55 Citations (Scopus)

Abstract

The hedonic pricing approach is used to examine whether homeowners and/or renters alter their subjective assessments of earthquake risks after massive earthquakes. Using nation-wide household panel data coupled with earthquake hazard information and records of observed earthquakes, we find that there are some modifications of individuals' assessments of earthquake risk in both cases. We have carefully taken into consideration the bias stemming from the use of objective risk variables as a proxy for individual risk assessments. Our results suggest that the price discount from locating within a quake-prone area is significantly larger soon after earthquake events than beforehand. We argue that the most likely interpretation for this result is that households tend to underestimate earthquake risk if there has not been a recent occurrence.

Original languageEnglish
Pages (from-to)658-669
Number of pages12
JournalRegional Science and Urban Economics
Volume39
Issue number6
DOIs
Publication statusPublished - 2009 Nov

Keywords

  • Earthquake risks
  • Hedonic price model
  • Panel data models

ASJC Scopus subject areas

  • Economics and Econometrics
  • Urban Studies

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