Presentation on theme: "Climate and Happiness Katrin Rehdanz and David Maddison"— Presentation transcript:
1Climate and Happiness Katrin Rehdanz and David Maddison Hamburg UniversityUniversity of Southern Denmark
2IntroductionClimate is an important input to many household activitiesAffects heating and cooling requirementsDetermines clothing and nutritional needsLimits recreational activitiesImpacts of an enhanced greenhouse effect are many and diverseThe effects of a changing climate might be positive or negative, depending on time and placeLittle is known about peoples preferences for a particular climateCan we determine the economic impacts of future climate change to households/individuals?Is climate a determinant of happiness?
4Outline Why are we interested in peoples preferences? Different valuation methodsHappiness researchHappiness in economicsRegression analysis
5Why investigating preferences? Tackling the problem of future climate changeshas major implications for policies of development and managementis very costlyResearch work has generally focused on changes in productivity in sectorsLittle attention has been drawn to climate as an input to household activitiesTo determine, if climate change is good or bad indicators are neededHow can we measure the preferences for commodities not being traded on a market?
6Environmental Valuation Methods Environmental goods are not traded on a marketHow can we estimate the price nonetheless?Indirect valuationlooks at surrogate markets (complements, substitutes)e.g. hedonic pricing method, household production function approachDirect valuationHypothetical markete.g. contingent valuation Happiness researchPeople are directly asked about their subjective well-being
7Happiness Research Domain of psychologists Analysis of individuals evaluation of lifecircumstances and comparisons to other peoplepast experience andexpectation of the futureHow is happiness measured?Different type of questions„Taking all together, would you say you are:very happyfairly happynot happy at all.“Decades of validation research
8Happiness in Economics Uncommon in economicsObjective positionobservable choices made by individualspreferences over goods and servicesWelfare‚Satisfaction‘ with incomeMore income enables individuals to satisfy more needs... and more goods and services can be consumedConsequently... economic growth is one of the major objectives of economic policy in any country
9Income and Happiness Well-being Broader conceptSatisfation with life as a whole (happiness)What is the relationship between income and happiness?Are persons with high income at a given point in time happier than those with low income?Are persons in rich countries happier than those in poor countries?Does an increase in income over time raise happiness?
10Income and Happiness (2) On average richer people report higher subjective well-beingRelationship seems to be nonlinearIncome does buy happinessOn average people living in rich countries are happier than those living in poor countriesHappiness appears to be relatively stable and remaining flat with growing income
11Sum upStandard economic theory rejects subjective experience as being ‚unscientific‘... but there are limits to which material goods and income create utility… and income can explain only a low proportion of differences in happinessSo, what else determines differences in happiness?
12Recent Research Influence of unemployment, inflation and recession Clark and Oswald (1994)Di Tella et al. (2001, forthcoming)Political and personal freedoms of a countryFrey and Stutzer (2000)Environmental quality such as noise or air pollutionVan Praag and Baarsma (2001)Welsch (2002)
13Research on the amenity value of climate Hedonic approachMainly applied to the USOne of the few studies for Europe is Maddison and Bigano (2003)Household production function approachCross-country comparisons possibleInvestigates changes in the consumption of related commoditiesMaddison (forthcoming)
14Regression Analysis Regression analysis Model specification Investigates on the relationship between climate and happinessEstimates the magnitude of the effects of changes in climateControlling for many other factorsModel specificationWhich explanatory variables should be included?Which functional form is appropriate?
15Variables Happiness data Economic variables Demographic variables Self-reported happiness for 67 countries for different years185 observations, 4 item response categoryEconomic variablesGDP per capita in 1995 USDAnnual growth in GDPShortfall in incomeAnnual inflation rateAnnual rate of unemploymentDemographic variablesLife expectancyLiteracy ratePopulation densityProportion of population above 65 yearsProportion of population below 15 years
16Variables (2) Cultural differences Political and civil rightsReligionClimate variables in various indicesTemperature, precipitationAnnually averaged meansExtremesNumber of months with a particular climate
17Model specification Climate variables Modification Functional form Minimum and maximumAnnual averages and its squaresNumber of hot, cold, dry and wet monthsModificationSampling weightsFunctional formLinearSemi-log, logistic
19Results (2)Climate variables explain part of the differences in self reported levels of happinessPeople seem to be concerned aboutvery low temperaturesvery high temperaturesvery little rain (model 2)What is the impact of climate change?Calculate the change in GDP per capita necessary to hold happiness at its current level
20Climate ChangePredicted changes in climate for 2 time slices ( and )Temperature changesMost warming during winter months and in high latitudesVery warm summers will become more frequentVery cold winters will become very rareChanges in precipitationGreat uncertaintyGeographic differences in rainfall are becoming more pronouncedIncreased precipitation in high latitudesMore seasonal: drier summers and wetter winters in high latitudes
24Conclusions Income does buy happiness … but can explain only a low proportion of differences in happinessAmong other variables climate is one determinant of happinessWe can use this information to calculate the impact of climate changeOur results support findings thatHigh latitude countries might benefit from modest global warmingLow latitude countries would suffer losses
25Conclusions Number of limitations: Climate and climate change differ not only between countries, but also withinOther climate variablesOther consequences of climate changeIndirect effects like extreme weather eventsTime it takes people to adapt