THE AMENITY VALUE OF CLIMATE: THE HOUSEHOLD PRODUCTION FUNCTION APPROACH by

A basic assumption of the hedonic technique is that there are no barriers to mobility which prevent prices changing to reflect the net benefits of a given location. But climate variables are undeviating over relatively large differences and the absence of a common language and/or cultural ties may prevent the net advantages associated with a particular region from being eliminated. Methods alternative to the hedonic approach may be required to estimate the amenity value of climate. This paper undertakes a systematic examination of the role played by climate in determining consumption patters using cross-sectional data from 60 different countries and then proceeds to calculate the implicit price of a range of climate variables for each country.