Data and Code for: Adaptation and Adverse Selection in Markets for Natural Disaster Insurance

This paper quantifies frictions in uptake, tests for adverse selection, and analyzes welfare effects of proposed reforms in natural disaster insurance markets. I find that willingness to pay is remarkably low. In high-risk flood zones, fewer than 60% of homeowners purchase flood insurance even though premia are only two-thirds of own costs. Estimating flood insurance demand and cost elasticities using house-level variation in premia from recent U.S. Congressional reforms reveals that these homeowners select into insurance based on observable differences in adaptation, but not private information about risk. These findings change the sign of predicted welfare effects of proposed policies. <br>