ECONOMICS ALUMNI NEWSLETTER
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Our department is excited to introduce some of the innovative research projects that our faculty<br />
members have been conducting. This newsletter includes projects that have been presented by our<br />
faculty members David Kelly, and Alex Horenstein.<br />
Professor David Kelly on<br />
David L Kelly and Renato Molina<br />
Forthcoming: Journal of the Association of Environmental and Resource Economists<br />
Link to paper: http://moya.bus.miami.edu/~dkelly/papers/Adaptation_final.pdf<br />
What are the effects of climate adaptation infrastructure investments (sea walls, pumping stations,<br />
elevating roads, drainage systems, and other infrastructure) on surrounding property values? This is a<br />
question that many property owners in the Miami-Dade region would like to know! Professors David<br />
Kelly and Renato Molina highlight their findings below.<br />
Renato Molina and I evaluate the effect of climate adaptation infrastructure investments on property<br />
transaction prices using data on over four hundred thousand property transactions and 162<br />
infrastructure projects in the Miami-Dade County, an area that is highly vulnerable to flooding and sea<br />
level rise due to climate change. Exploiting the timing and sitting of different adaptation projects in<br />
Miami-Dade, we find that property values near the projects increase by about 5% more than surrounding<br />
areas after the projects are completed. Because property values increase near the projects after<br />
completion, we can rule out other factors that affect property values everywhere in Miami, such as the<br />
trend towards remote work.<br />
These gains are concentrated in areas close to the project, and for projects that are visually<br />
identifiable. Our results suggest an aggregate mean benefit net of adaptation cost of about $680,000<br />
per project, and almost $300 million in aggregate net benefits for all projects in our sample. Most<br />
projects generated positive net benefits, indicating that most adaptation efforts are being placed in<br />
areas that pass a pecuniary benefit-cost test.<br />
Contrary to some news reports expressing skepticism of Miami’s ability to adapt to climate change, our<br />
results show that policies to city and the county to make Miami more resilient to climate change are<br />
working, as evidenced by higher demand for protected properties. The research also shows, however,<br />
that a tradeoff exists between affordable housing and making Miami more resilient, and that the city<br />
and county should consider the effect of adaptation infrastructure on the supply of affordable<br />
housing.
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