Household location decisions and the value of climate amenities

Abstract

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).

Analyzing the Role of Resource Factors in Citizens’ Intention to Pay for and Participate in Disaster Management

“…Moreover, the location of the household influences the willingness to pay related to risk. For example, Sinha et al [75] found that households in the Midwest region of the USA exhibited lower willingness to pay for temperature management than households in the Pacific and South Atlantic regions did.…”

Climate Preferences, Obesity, and Unobserved Heterogeneity in Cities

“…One application of the climate results is to the finding by Sinha and Cropper (2015) that household willingness to pay for warmer winters has a strong negative correlation with willingness to pay for warmer summers. The empirical results here confirm these effects as the attractive effects of winter and summer temperature carry opposite signs in the BMI and obesity equations.…”

“…This research has revealed significant diversity in marginal willingness to pay for environmental amenities even controlling for age, education, and income. Recently Sinha and Cropper (2015) have found substantial heterogeneity in responses to city climate.…”

Household Sorting as Adaptation to Hurricane Risk in the United States

“…Scholars have also been interested in migration within the United States (Molloy et al, 2011), in particular in response to environmental hazards including weather and climate (Deschenes and Moretti, 2009) as well as natural disasters (Boustan, Kahn, and Rhode, 2012;Hornbeck, 2012;Fan and Davlasheridze, 2019). Other studies use a residential sorting model to estimate the effects of a non-marginal change in climate by incorporating migration costs and preference heterogeneity (Timmins, 2007;Albouy et al, 2016;Sinha et al, 2017;Fan et. al, 2018).…”