2002/11/01 by James Chivers, Nicholas E. Flores
Economics, Econometrics and Finance · Environmental Science · #Flood Risk Assessment and Management #Housing Market and Economics #Insurance and Financial Risk Management
paper · doi:10.2307/3146850
crossref issued 2002/11/01 · crossref published 2002/11/01 · crossref published-online 2002/11/01 · crossref published-print 2002/11/01 · openalex publication_date 2002/11/01 · crossref created 2006/05/10 · crossref deposited 2025/04/25 · openalex created_date 2025/10/10 · crossref indexed 2026/07/31 · openalex updated_date 2026/07/31
<i>The National Flood Insurance Program (NFIP) was established in 1968 and requires mandatory flood insurance for property owners who have federally backed mortgages. Krutilla (1966) noted that a compulsory national flood insurance program could greatly improve the economic efficiency of flood plain occupancy in the United States. However, in order to realize the efficiency gains suggested by Krutilla, property owners must have sufficient information about flood risk and insurance premiums to make well-informed home purchase decisions. Using survey data from Boulder, Colorado, we find significant evidence of market failure in information in the NFIP program. The majority of survey respondents, all of whom live in a special flood hazard area, report they did not fully understand the degree of flood risk or the cost of insuring against this risk when negotiating the purchase of their property.</i> (JEL Q24)