Extreme Temperature, Climate Change, and American Quality of Life

David Albouy, Walter Graf, Ryan Kellogg, and Hendrik Wolff

Journal of the Association of Environmental and Resource Economists, 3(1), March 2016, pp. 205-246

Abstract:

We present a hedonic framework to estimate U.S. households’ preferences over local climates, using detailed weather and 2000 Census data. We find that Americans favor a daily average temperature of 65 degrees Fahrenheit, that they will pay more on the margin to avoid excess heat than cold, and that damages increase less than linearly over extreme temperatures. These preferences vary by location due to sorting or adaptation. Changes in climate amenities under business-as-usual predictions imply annual welfare losses of 1 to 4 percent of income by 2100, holding technology and preferences constant.