Natural Disasters, Land Price, and Location of Firms: Evidence from Thailand

Author Name SAWADA Yasuyuki  (Faculty Fellow, RIETI) /NAKATA Hiroyuki  (Fellow, RIETI) /SEKIGUCHI Kunio  (Consulting Fellow, RIETI)
Creation Date/NO. June 2014 14-E-029
Research Project Post-disaster Recovery Policies and Insurance Mechanisms against Disasters: Case studies on earthquakes in Japan and floods in Thailand
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This paper reviews the impacts of natural disasters on firm location choice and real estate prices. More specifically, we first study if awareness of possible natural disasters affects location choice. Then, we investigate the impacts of natural disasters on land prices. We collect a unique micro dataset from firms operating in central Thailand, where firms located in the Chao Phraya flood plains incurred direct losses during the 2011 floods. The empirical evidence suggests that more firms located in the Chao Phraya flood plains were unaware of the flooding risk before the 2011 floods than those located elsewhere. The 2011 floods have substantially affected awareness among firms—in particular, firms incurred direct losses, and the changes in land prices suggest that an increasing number of firms have been choosing locations outside the flood plains in the aftermath of the 2011 floods.