The value of climate amenities: A comparison of hedonic and discrete choice approaches

Abstract

Amenities that vary across cities are typically valued using either a hedonic model, in which amenities are capitalized into wages and housing prices, or a discrete model of household location choice. In this paper, we use the 2000 Public Use Microdata Sample (PUMS) to value climate amenities using both methods. We compare estimates of marginal willingness to pay (MWTP), allowing preferences for climate amenities to vary by location. We find that mean MWTP for warmer winters is about twice as large using the discrete choice approach as with the hedonic approach; mean MWTP for cooler summers is approximately the same. The two approaches differ, however, in their estimates of MWTP by location. These disparities lead to significant differences in estimates of willingness to pay to avoid the A2 and B1 SRES scenarios in 2020–2050 using the two approaches.