Abstract: Sea level rise poses an existential threat to Jakarta, which faces frequent and worsening flooding. The government has responded with a proposed sea wall. In this setting, I study how government intervention complicates long-run adaptation to climate change. I show that government intervention creates coastal moral hazard, and I quantify this force with a dynamic spatial model in which developers and residents act with flood risk in mind. I find that moral hazard generates severe lock-in and limits migration inland, even over the long run.
Link to working paper: https://allanhsiao.com/files/Hsiao_jakarta.pdf
- Center for Policy Research on Energy and the Environment
- High Meadows Environmental Institute
- Griswold Center for Economic Policy Studies
- Department of Economics
- Andlinger Center for Energy and the Environment