The Energy and Environmental Economics and Policy Seminar Series continues this week with a presentation from Dr. Yilan Xu, Associate Professor in the Department of Agricultural and Consumer Economics at the University of Illinois at Urbana-Champaign. Dr. Xu will speak about how social learning impacts our response to climate risk.
Abstract: Natural disasters provide opportunities for decision-makers to learn about climate risks. However, relying only on personal experiences results in temporary and slow learning. This paper examines whether social learning takes place in that decision-makers learn from peer experiences. Using the Facebook Social Connectedness Index (SCI) to construct a network adjacency matrix, we estimate a Network Difference-in-differences (NDID) model to account for the social learning effects of peer flood experiences. We find that the major regional hurricanes of 2017, Harvey and Irma, increased flood insurance policies in force (PIF) in both flooded and unflooded counties based on relative social proximity to the flooded. The average social learning effect is 19.8% in flooded counties and 1.8% in unflooded counties. A back-of-envelope calculation suggests that Hurricane Harvey brought in 250,000 more PIF in flooded areas and 81,000 more PIF in unflooded areas in the two years following the event. We show evidence of the salience effect but no support for adverse selection or over-insurance after the hurricanes.
Presenter Bio: Dr. Yilan Xu is an Associate Professor in the Department of Agricultural and Consumer Economics at the University of Illinois at Urbana-Champaign. Her fields of interest include consumer economics and finance, urban economics, and environmental economics. Her current research explores the social network connections between regions, such as friendship, social media information, travel flows, transportation, trade, and atmospheric movement, and how these social networks mediate the spillover effects of regional events. Her research findings can be leveraged to monitor potential systemic risks and to formulate strategies to enhance our society’s resilience to crises such as climate change and pandemics. Dr. Xu has published in the Proceedings of the National Academy of Sciences, Journal of Environmental Economics and Management, Journal of Economic Behavior and Organization, Regional Science and Urban Economics, Journal of Economic Geography, Journal of Consumer Affairs, and Social Science and Medicine. She is the President-elect of the American Council on Consumer Interests (ACCI).
Linlin Fan, PhD, Assistant Professor of Agricultural Economics, will serve as host for the presentation.