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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

Suggested Citation

  • David Maddison & Katrin Rehdanz & Daiju Narita, 2013. "The household production function approach to valuing climate: the case of Japan," Climatic Change, Springer, vol. 116(2), pages 207-229, January.
    • Handle: RePEc:spr:climat:v:116:y:2013:i:2:p:207-229
    DOI: 10.1007/s10584-012-0478-5
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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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