Realization of Earthquake Risk and Housing Prices in China
Realization of Earthquake Risk and Housing Prices in China
This research project aims at analyzing the economic effects of earthquake risk realization, using the example of urban housing prices in China. Empirical evidence as to how catastrophic tail events affect asset prices in illiquid markets is of substantial practical relevance for households, insurers and public policy alike. To achieve this objective, a panel data set which integrates information on major earthquake events with economic information for more than 330 Chinese cities will be analyzed. This unique data set combines three key advantages that can be exploited for the identification of dynamic price effects: 1.) A very large cross-section; 2.) Little variation in housing market institutions across cities; and 3.) Substantial temporal variation in prices, which helps to account for differences in the short- and long-run effects of earthquake events.