WEAI/AERE 2012 - Individual Paper Abstract
Title: Climate Change Impacts on Household Location Choice in the U.S.
Author(s): Qin FAN,Department of Agricultural Economics and Rural Sociology, Pennsylvania State University, 13 Armsby Building, University Park, PA 16801, USA, 814-753-0452, quf101 at psu dot edu; H. Allen Klaiber, Ohio State University; Karen Fisher-Vanden, Pennsylvania State University [Photo credit: Qin Fan]
Abstract:
To incorporate preference heterogeneity in understanding the potential migration pattern in the U.S. in response to changes in climate variability, this paper examines climate change impacts on household location choice and predicts population changes across regions under hypothetical changes in temperature extremes. The main dataset is the Integrated Public Use Microdata Sample (IPUMS) which provides demographic characteristics of approximately 2.4 million households located in 283 Metropolitan Statistical Areas (MSAs) of the U.S. in the year 2000. A two-stage residential sorting model is employed in the paper. This approach models the way households sort into local jurisdictions to obtain an optimal level of local public goods given prices and the location choices of other households. The first-stage discrete choice model employs a multinomial logit specification to recover heterogeneous parameters associated with MSA specific variables, migration costs, along with the mean indirect utility of each MSA. In particular, the interaction terms of extreme temperatures and individual-specific characteristics, such as one's birth region, age and educational attainment are used to recover valuations of extreme temperatures for different classes of people with potentially different preferences. The second stage of this model decomposes the mean indirect utility obtained from the first stage into its MSA-specific observables and unobservables using region fixed effects.
Results show that extreme temperatures, extreme precipitation, and extreme events (e.g. tornado watches) reduce utility, and an individual's preference for extreme temperatures is heterogeneous. The climate of one's place of birth and demographic characteristics, such as education and age, are significant factors that lead to this preference heterogeneity. Migration costs are statistically significant. If migration costs are high, individuals are less likely to relocate for the sake of moderate changes in weather extremes. In addition, we find a drop in population share in the Southern region under simulations of climate change scenarios, while we find a gain in population share in the Northeastern region. The uneven labor distribution due to climate change-induced migration may result in heterogeneous economic impacts in different regions of the United States. Our findings suggest that mitigating policies that can respond to this migration trajectory should be considered to reduce the negative impacts from the uneven distribution of labor supply across regions under changes in climate.