- Working Paper"Private Benefits from Public Investment in Climate Adaptation and Resilience"Bradt, J.T., and Aldy, J.E.Ongoing
A changing climate will cause more intense and frequent flooding across the United States, resulting in major losses of life and property. As these risks intensify, governments will consider ways to enhance infrastructure resilience as illustrated by the Infrastructure Investment and Jobs Act of 2021, which appropriates more than $50 billion for climate adaptation in the US. We estimate the magnitude and distribution of benefits from public flood risk adaptation infrastructure—including levees, floodwalls, channel modifications, and beach nourishment—to explore the efficiency and equity implications of these large-scale public investments. We use novel data on over 20,000 flood protection and adaptation projects in the continental US acquired from the First Street Foundation in combination with 30 years of data on nationwide residential property transactions to estimate the effect of public adaptation investments on US housing prices. To address the potential endogeneity of public adaptation investment siting, we leverage detailed information on the spatial extent of areas protected by flood adaptation projects to estimate a difference-in-discontinuities design. Using data on the timing of adaptation project construction, we estimate the benefits of adaptation projects as the difference in sales prices for nearby homes on either side of the protected area boundary before and after project construction. Preliminary results suggest that these investments increase the sale price of protected homes by about 10%. We explore the distributional incidence of this subsidy by linking our residential transactions data to household-level demographic data available through the Home Mortgage Disclosure Act, and find evidence that high-income households sort into protected areas following project construction. Combining these estimated private capitalized benefits with measures of project-specific public expenditures, which we are currently collecting, will facilitate welfare analyses of these projects.
- In Progress"Unconventional Industrial Policy: Demand Subsidies, Learning, and Entry in the US Residential Solar Industry"Bradt, J.T.Ongoing
Consumer subsidies are a common policy tool for supporting the adoption of clean energy technologies. I examine the impact of consumer subsidies for clean technology adoption on supply side market structure in the context of the California Solar Initiative, which provided $2.2 billion in subsidies to households adopting photovoltaic (PV) systems from 2007 to 2016. I develop a model of market entry and exit for PV installation firms that accounts for learning-by-doing.
- In Progress"Spatial Sorting, Agglomeration Economies, and Travel Cost Endogeneity in Recreation Demand Models"Bradt, J.T.Ongoing
Conventional recreation demand models assume that travel cost is exogenously determined; however, the costs individuals face when choosing which recreation site to visit are the result of a spatial sorting equilibrium which may be affected by the location of recreation sites and their different observed or unobserved attributes. This paper provides a simple approach to account for the potential endogeneity problem in travel cost models and demonstrates the importance of addressing this source of bias.
- Publication"Voluntary purchases and adverse selection in the market for flood insurance"Bradt, J.T., Kousky, K., and Wing, O.E.J.Journal of Environmental Economics and Management, Oct 2021
Flood-related events are the most damaging natural hazard in the United States, yet many households at risk do not have flood insurance. Using detailed policy- and claims-level data from the National Flood Insurance Program (NFIP), we conduct a holistic analysis of the market for publicly provided flood insurance in the U.S., focusing on not only high-risk areas subject to an incomplete mandate requiring the purchase of insurance, but also lower risk areas where no such mandate exists. We are able to better understand determinants of demand for insurance in a setting with voluntary purchase and low take-up and therefore provide a more complete analysis of the market for flood insurance in the U.S. than previous work. In addition to exploring correlates of demand for flood insurance, this paper provides quasi-experimental estimates of households’ willingness-to-pay for flood insurance and finds strong evidence to suggest the NFIP failing to utilize full information on flood risk leads to adverse selection in the program.
- Publication"Analysis of proposed 20-year mineral leasing withdrawal in Superior National Forest"Stock, J.H., and Bradt, J.T.Ecological Economics, Aug 2020
The Rainy River Watershed on the Superior National Forest is home to the Boundary Waters Canoe Area Wilderness (BWCAW). It also contains deposits of copper, nickel, and trace metals, and copper-nickel mining has been proposed adjacent to and upstream of the BWCAW. In 2017, the US Department of Agriculture proposed withdrawing land in the Rainy River Watershed within the Superior National Forest from mineral leasing, a position it reversed in 2018. These developments highlight the potential tradeoff between economic benefits from mining and concerns about its negative economic consequences for the local recreational and amenity-based economy. Previous studies of mining in the Superior National Forest focus on static effects on a single industry (e.g., mining) at some unspecified point over a medium-run horizon. We draw on these studies and the economics literature to provide a unified analysis of the effect of the proposed mining development on income and employment over time. Our results suggest that the proposed mining would lead to a boom-bust cycle that is typical of resource extraction economies, exacerbated by the likely negative effect on the recreation industry.
- Publication"’Underwaterwriting:’ From theory to empiricism in regional mortgage markets in the U.S."Keenan, JM., and Bradt, J.T.Climatic Change, Aug 2020
This article provides the theoretical foundation for the concept of “Underwaterwriting,” which can be understood as various informational and institutional limitations related to environmental exposure and climate change impacts—specifically flooding and sea level rise inundation—shaping firm participation in mortgage markets. Underwaterwriting suggests that the unevenness of scientific knowledge and local soft information, as well as the institutional barriers for the utilization of that information, could result in determinations of risk that may not accurately reflect long-term asset performance or credit loss. These informational asymmetries may result in assignments of risk that reflect a degree of arbitrariness or inaccuracy that may operate to strand assets and shed or increase market share in ways that are inefficient and may otherwise lead to negative public externalities. Consistent with this theory, this article provides evidence that concentrated local lenders are transferring risk in high-risk coastal geographies in the Southeast Atlantic and Gulf Coasts (U.S.) through increased securitization of mortgages. These findings provide an impetus for supporting more robust analysis of climate-risk in light of forthcoming accounting rules that require an upfront accounting of forward-looking credit losses.
- Publication"Comparing the effects of behaviorally informed interventions on flood insurance demand: an experimental analysis of ‘boosts’ and ‘nudges’"Bradt, J.T.Behavioural Public Policy, Aug 2019
This paper compares the effects of two types of behaviorally informed policy – nudges and boosts – that are designed to increase consumer demand for insurance against low-probability, high-consequence events. Using previous findings in the behavioral sciences literature, this paper constructs and implements two nudges (an ‘informational’ and an ‘affective’ nudge) and a statistical numeracy boost and then elicits individual risk beliefs and demand for flood insurance using a contingent valuation survey of 331 participants recruited from an online labor pool. Using a two-limit Tobit model to estimate willingness to pay (WTP) for flood insurance, this paper finds that the affective and informational nudges result in increases in WTP for flood insurance of roughly \21/month and \11/month relative to the boost, respectively. Taken together, the findings of this paper suggest that nudges are the more effective behaviorally informed policy in this setting, particularly when the nudge design targets the affect and availability heuristics; however, additional research is necessary to establish sufficient conditions for this conclusion.