Working Paper: NBER ID: w18756
Authors: Paramita Sinha; Maureen L. Cropper
Abstract: We value climate amenities by estimating a discrete location choice model for households that changed metropolitan statistical areas (MSAs) between 1995 and 2000. The utility of each MSA depends on location-specific amenities, earnings opportunities, housing costs, and the cost of moving to the MSA from the household's 1995 location. We use the estimated trade-off between wages and climate amenities to value changes in mean winter and summer temperatures. At median temperatures for 1970 to 2000, a 1°F increase in winter temperature is worth less than a 1° decrease in summer temperature; however, the reverse is true at winter temperatures below 25°F. These results imply an average welfare loss of 2.7 percent of household income in 2020 to 2050 under the B1 (climate-friendly) scenario from the special report on emissions scenarios (Intergovernmental Panel on Climate Change 2000), although some cities in the Northeast and Midwest benefit. Under the A2 (more extreme) scenario, households in 25 of 26 cities suffer an average welfare loss equal to 5 percent of income.
Keywords: climate amenities; migration; willingness to pay; temperature changes
JEL Codes: Q5; Q51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Climate amenities (Q54) | Household location choices (R20) |
| MWTP to lower summer temperature by 1°F (L97) | MWTP for a 1°F increase in winter temperature (Q49) |
| Household age (46-55 years) (J12) | Value on climate amenities (Q51) |
| Household size (D10) | Willingness to pay for climate amenities (Q26) |
| 1°F increase in winter temperature + 1°F increase in summer temperature (Q54) | Welfare reduction by about 0.25% of income (H53) |
| Average welfare loss under B1 scenario (D69) | Household income (D19) |
| Average welfare loss under A2 scenario (D69) | Household income (D19) |
| Mean summer temperature (C29) | Disamenity of hotter summers (Q54) |