Learning about an Infrequent Event: Evidence from Flood Insurance Take-Up in the United States

• 成果类型: Article
• 署名作者: Gallagher, Justin
• 署名单位: University System of Ohio; Case Western Reserve University
• 刊物名称: AMERICAN ECONOMIC JOURNAL-APPLIED ECONOMICS
• ISSN/ISSBN: 1945-7782
• DOI: 10.1257/app.6.3.206
• 发表日期: 2014
• 页码: 206-233
• 关键词: risk; experience; BEHAVIOR; program

摘要

I examine the learning process that economic agents use to update their expectation of an uncertain and infrequently observed event. I use a new nation-wide panel dataset of large regional floods and flood insurance policies to show that insurance take-up spikes the year after a flood and then steadily declines to baseline. Residents in nonflooded communities in the same television media market increase take-up at one-third the rate of flooded communities. I find that insurance take-up is most consistent with a Bayesian learning model that allows for forgetting or incomplete information about past floods.