Are People Willing to Pay to Prevent Natural Disasters?

Abstract:

We implement a survey experiment to study whether awareness of the consequences of hydrogeological risk affects people’s willingness to fight it. To do so, we leverage a representative panel of 5,000 Italian individuals interviewed at quarterly frequency, starting in October 2023. We elicit survey participants’ willingness to contribute to a public fund to finance investment to secure areas exposed to hydrogeological risk under different information treatments. We find that disclosing information about the consequences of hydrogeological risk causes individuals to increase both support for public funding and individual willingness to pay for the policy. Compared to the control group, individuals exposed to the treatment were 9 percentage points more likely to contribute to the fund and more willing to contribute an additional €29. Applying the information treatment to the whole working age population could raise as much as €0.26 billion per year. We provide evidence that individual willingness to pay depends on individual knowledge that the success of the policy depends critically on the willingness to pay of other citizens.