We value climate amenities by estimating a discrete location choice model for US households. The utility of each metropolitan statistical area (MSA) depends on location-specific amenities, earnings opportunities, housing costs, and the cost of moving to the MSA from the household head's birthplace. We use the estimated trade-off among wages, housing costs, and climate amenities to value changes in mean winter and summer temperatures. We find that households sort among MSAs as a result of heterogeneous tastes for winter and summer temperatures. Preferences for winter and summer temperatures are negatively correlated: households that prefer milder winters, on average, prefer cooler summers, and households that prefer colder winters prefer warmer summers. Households in the Midwest region, on average, have lower marginal willingness to pay to increase winter and reduce summer temperatures than households in the Pacific and South Atlantic census divisions. We use our results to value changes in winter and summer temperatures for the period 2020 to 2050 under the B1 (climate-friendly) and A2 (more extreme) climate scenarios. On average, households are willing to pay 1 percent of income to avoid the B1 scenario and 2.4 percent of income to avoid the A2 scenario. ; Maureen Cropper, Un iversity of Maryland and Resources for the Future, cropper@rff.o rg. We thank the US Environ mental Protection Agency, RTI Intern ational, and Resources for the Future for funding. This paper would not have been possible without GIS support from RTI. 1 Formally, marginal WTP for an amen ity equals the sum of the slope of the hedonic wage function with respect to the amenity plus the slope of the hedonic property value function, weighted by the share of inco me spent on housing, evaluated at the chosen amenity vector (Roback 1982).

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Amenities that vary across cities are typically valued using either a hedonic model, in which amenities are capitalized into wages and housing prices, or a discrete model of household location choice. In this paper, we use the 2000 Public Use Microdata Sample (PUMS) to value climate amenities using both methods. We compare estimates of marginal willingness to pay (MWTP), allowing preferences for climate amenities to vary by location. We find that mean MWTP for warmer winters is about twice as large using the discrete choice approach as with the hedonic approach; mean MWTP for cooler summers is approximately the same. The two approaches differ, however, in their estimates of taste sorting. The discrete choice model implies that households with the highest MWTP for warmer winters locate in cities with the mildest winters, while the hedonic model does not. Differences in estimates are due to primarily to two factors: (1) the discrete choice model incorporates the psychological costs of moving from one's birthplace, which the hedonic models do not; (2) the discrete choice model uses information on market shares (i.e., population) in estimating parameters, which the hedonic model does not.

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