Maria Teresa Gonzalez Valencia

Essays on the Economic Valuation of Forest Fires

Maria Teresa’s thesis looks at changes in safety preferences from three types of wildfire events: a wildfire disaster, prescribed burning as a forest management practice, and the introduction of wildfire risk maps. For her analysis, she focuses on Western Australia, a region with high exposure to fires but rarely studied from the economics perspective. To capture the changes in safety preferences from wildfire events, and with the aid of property market and spatial GIS data from 2010 to 2019, she implements the hedonic property model and makes use of impact evaluation strategies such as difference-in-differences and regression discontinuity design. 

Her findings suggest that wildfire events can have both a “wake-up call” and an “all-clears” effect. On one hand, wildfires serve as a wake-up call, i.e., property market sale prices decline, for those households living in the near-miss area that receive warnings during the fire event, and also for households that live within areas mapped as “bushfire prone”. On the other hand, wildfires serve as an all-clears, i.e., prices increase, for those living in the near-miss area (close enough to benefit from the risk reduction effect of burnt fuel) but free from warnings, and for those living in areas where prescribed burning has been ineffective in preventing wildfires within 5 km from the property. Altogether, these findings suggest the market reacts to wildfire events and policy makers need to be careful when carrying out warning systems, prescribed burning practices, and risk mapping, as these affect the wealth of households and perhaps the most important investment decision: choosing where to live. 

Suprivisors: David J. Maddison, Allan Beltran Hernandez

Email: mtg724@bham.ac.uk