Sorting Over Wildfire Hazard - Lala Ma, Matthew Wibbenmeyer, Emily Joiner, Connor Lennon, and Margaret Walls Working Paper 24-05

The basic intuition is that the shadow value of income can be estimated based on moving costs, which are related to the value of the previous home and arguably exogenous to unobserved characteristics of the new home. [...] (6) The choice-specific component, δjt, represents the mean utility of the base (or omitted) group, which consists of those in the lowest-income tercile.17 The remaining components not absorbed in δjt include the heterogeneous taste parameters (αk,x2) and the financial disutility of moving (βFMC). [...] The parameter αk,x2 is the coefficient on the interaction between the 16Our analysis focuses on the decision of whether to move in a given period (and if so, where to move to) rather than the decision of when to move. [...] Therefore, in addition to these, we now include a set of proximity to boundary by boundary segment fixed effects; as in our main estimates, these fixed effects capture time-invariant similarities in the value of properties within 1 km of the same segment.25 The coefficient on the triple interaction returns the difference in the effect of disclosure on preferences over hazard between areas that are. [...] How fire experience affects the choice to live in the WUI will depend on the explanation and is crucial for assessing future wildfire damages as population and development in the WUI continue to grow.