Three essays on the welfare impact of natural amenities and natural disasters
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This dissertation analyzes and investigates the welfare impacts of natural amenities and natural disasters. In the first essay, we shed light on an unresolved puzzle in models of interurban spatial equilibrium; in theory, housing prices and wages should compensate for differences in utility across space. Yet, empirical studies show a large spatial variation in subjective well-being (SWB) across United States counties. We find that these amenities explain a sizable fraction of the variation in county-level life satisfaction and that housing and labor markets do not fully capitalize the environmental and climate-driven spatial variation in the county-average SWB. This is important because the impacts of environmental quality on well-being provide a major rationale for environmental management and regulation. Finding that climate amenities are particularly important among local environmental conditions, in the second essay, we specifically focus on the impact of billion-dollars natural disasters on SWB and investigate the temporal impact of natural disasters. By utilizing a quasi-experimental design and combining subjective well-being and extreme weather events data, we estimate and monetize the adverse impact of natural disasters and explicitly focus on the intangible direct and indirect costs of natural disasters which are inevitably understated in prior analyses. Our findings illustrate that the impact of events on individual SWB decays six months after the event. This study provides useful information for policy-making, by suggesting a policy-relevant time frame to escalate the community healing process. We then investigate the attenuating impact of health care access, natural-peril insurance, and governmental assistance programs and find a partial compensating role for both private and public protective measures. The third essay estimates the economic value of multi-peril hazard insurance combining stated and revealed preference data. Our results indicate that the value of multi-peril hazard insurance is substantially higher for households who live in the coastal zone and on the oceanfront and lower for those not required to buy the flood insurance. We find a significant change in the welfare effect of climate-related disaster depending on individual food and erosion risk perceptions. This has clear policy implications as Congress debates on how to restructure the National Flood Insurance Program to enforce risk-rated insurance premium and deal with the financial deficit of NFIP.