Heterogeneous Individual Valuations of a Mild Climate

Abstract

Abstract This paper explores heterogeneous individual valuations of an important amenity, climate mildness, using a traditional Rosen-Roback empirical framework. It does so by including interaction terms between the amenity and worker characteristics in an hedonic wage regression that also includes a housing-price measure. The results suggest that non-young workers (those in the mid-age and old groups) value a mild climate more than do young workers, matching the usual view that the tolerance for cold weather declines with age. The findings also suggest that, like their highly educated counterparts, workers with low education levels also highly value a mild climate, with workers in the middle range of education having a lower valuation. These findings, which contradict the view that only better-off individuals care about amenities, could reflect the lower burden in mild weather of the manual work done by the less educated. In addition to presenting these empirical findings, the paper further contributes by presenting new analytics for the Rosen-Roback model in a setting with individual heterogeneity.