Kiel Working Papers, Kiel Institute for World Economics
No 1693:
The Household Production Function Approach to Valuing Climate: The Case of Japan
David Maddison, Katrin Rehdanz and Daiju Narita
Abstract: According to household production function theory
households combine marketed goods and nonmarket environmental goods to
produce service flows of direct value to the household. This readily
explains why, as an input to household production activities, households
might have preferences over the climate. Using techniques more frequently
employed to account for differences in the demographic composition of
households we use household production function theory to estimate climate
equivalence scales using household expenditure data drawn from 51 Japanese
cities over the period 2000-2009. Our results indicate that warmer
temperatures result in a small but statistically highly significant
reduction in the cost of living. Combining these estimates with climate
change scenarios associated with the IPCC A2, A1B, and B1 emissions
scenarios other things being equal points to a slight reduction in Japanese
households’ cost of living
Keywords: Consumer Demand; Household Production Function; Climate; Japan; (follow links to similar papers)
JEL-Codes: D12,; D13,; Q51,; Q54; (follow links to similar papers)
37 pages, April 2011
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