Review Paper — Assessing the Economic Implications of Land Subsidence

Land subsidence, the sinking of the Earth’s surface due to the movement of subsurface earth materials, affects nearly one-fifth of the global population and generates consequential and widespread damages to natural and human systems. Yet, the phenomenon has received little attention to date in the economic literature. Some effort has been undertaken to estimate the direct damages to buildings and infrastructure and the indirect damages that arise as flood risk increases, especially in coastal, urban areas that are vulnerable to the effects of sea-level rise. In addition, several studies have integrated hydrologic and economic models to identify efficient policies to regulate groundwater pumping, the leading driver of land subsidence. There are compelling opportunities for economists to extend the knowledge frontier on this topic, for example by estimating environmental damages, building integrated assessment models to evaluate policy options, and exploring parallels with the climate change literature.