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Abstract
In the U.S., billions of dollars are spent each year to recover and mitigate from flood, where most of the amount comes through federal budget. Uptake of flood insurance can transfer the disaster cost to the residence instead to the federal government. Understanding the factors that affects the public insurance demand, like risk perception, is therefore important. Nevertheless, risk perception can be correlated with the unobserved factors that also affects the insurance purchase decision, making the parameter of interest endogenous. We use Special Regressor (SR) approach to address endogeneity and found risk perception to have significant and positive impact on insurance uptake. Our result from SR shows that unit increase in expected probability of hurricane will increase insurance uptake by 46 percent. Furthermore, this study has policy implication for the government or private insurance sector, and also adds to the limited literature on endogeneity correction in risk perception.