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The household production function approach to valuing climate: the case of Japan

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  • David Maddison

    ()

  • Katrin Rehdanz
  • 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. Copyright Springer Science+Business Media B.V. 2013

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Bibliographic Info

Article provided by Springer in its journal Climatic Change.

Volume (Year): 116 (2013)
Issue (Month): 2 (January)
Pages: 207-229

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Handle: RePEc:spr:climat:v:116:y:2013:i:2:p:207-229

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  1. Rehdanz, Katrin & Maddison, David, 2005. "Climate and happiness," Ecological Economics, Elsevier, vol. 52(1), pages 111-125, January.
    • Katrin Rehdanz & David J. Maddison, 2003. "Climate and Happiness," Working Papers FNU-20, Research unit Sustainability and Global Change, Hamburg University, revised Apr 2003.
  2. Pollak, Robert A & Wales, Terence J, 1981. "Demographic Variables in Demand Analysis," Econometrica, Econometric Society, vol. 49(6), pages 1533-51, November.
  3. Van Praag, Bernard M. S., 1988. "Climate equivalence scales : An application of a general method," European Economic Review, Elsevier, vol. 32(4), pages 1019-1024, April.
  4. Maddison, David & Bigano, Andrea, 2003. "The amenity value of the Italian climate," Journal of Environmental Economics and Management, Elsevier, vol. 45(2), pages 319-332, March.
  5. Stigler, George J & Becker, Gary S, 1977. "De Gustibus Non Est Disputandum," American Economic Review, American Economic Association, vol. 67(2), pages 76-90, March.
  6. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-78, December.
  7. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
  8. Cragg, Michael & Kahn, Matthew, 1997. "New Estimates of Climate Demand: Evidence from Location Choice," Journal of Urban Economics, Elsevier, vol. 42(2), pages 261-284, September.
  9. Seki Asano & Takashi Fukushima, 2006. "Some Empirical Evidence On Demand System And Optimal Commodity Taxation," The Japanese Economic Review, Japanese Economic Association, vol. 57(1), pages 50-68.
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