Climatic Change

, Volume 116, Issue 2, pp 207–229 | Cite as

The household production function approach to valuing climate: the case of Japan

  • David MaddisonEmail author
  • Katrin Rehdanz
  • Daiju Narita


According to household production function theory households combine marketed goods and nonmarket environmental goods to produce service flows of direct value to the household. This readily explains why, as an input to household production activities, households might have preferences over the climate. Using techniques more frequently employed to account for differences in the demographic composition of households we use household production function theory to estimate climate equivalence scales using household expenditure data drawn from 51 Japanese cities over the period 2000–2009. Our results indicate that warmer temperatures result in a small but statistically highly significant reduction in the cost of living. Combining these estimates with climate change scenarios associated with the IPCC A2, A1B, and B1 emissions scenarios other things being equal points to a slight reduction in Japanese households’ cost of living.


Climate Change Scenario Service Flow Compensate Surplus Household Expenditure Survey Linear Expenditure System 
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Copyright information

© Springer Science+Business Media B.V. 2012

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of BirminghamBirminghamUK
  2. 2.Kiel Institute for the World EconomyKielGermany
  3. 3.Department of EconomicsChristian-Albrechts-University of KielKielGermany

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