Extreme Weather

The effects of extreme weather events on self-protection investments

Data from a tornado shelter (safe-room) rebate program in Arkansas from 2006 through 2010 permits us to examine the role of risk perceptions in stimulating homeowner investments in self-protection. The decision to self-protect depends upon both the recency and the proximity of tornado events, as well as on average education and income levels in the county in question. The pulse in self-protection investment after a tornado is relatively large, yet short-lived and relatively local, and there is some evidence that short-run supply constraints limit the expression of peak demand over time and across space.