The response of land markets to flood protection and flood experience: a hedonic price modeling on the Gironde estuary (France)

We develop a hedonic price model on the Gironde estuary (south of France) in order to test the impact of vulnerability to flooding on land prices. The original contribution of our analysis relies on distinguishing the respective impact of two non-structural measures on land prices - the preventive strategy consisting in a flood hazard zoning and the curative response to flood events consisting in orders for natural disaster to initiate financial compensation. This analysis is conducted on three different segments of land market (agricultural, vineyards and residential segments). We pay a particular attention to the respective importance of attractiveness factors from vulnerability ones to explain land price. We use a two-step method to estimate the model, starting with a semi-parametric model (based on the distance to the estuary) followed by a feasible generalized spatial two-stage least squares (FGS2SLS) with which we correct the model from spatial autocorrelation and endogeneity. Our main results indicate that both zoning measure and institutional response to vulnerability to flooding have a significant impact on prices, but in an opposite direction. We discuss the policy implications related to flooding prevention in regards to land use changes