Transcript Climate and Happiness - International Centre for

Climate and Happiness
Katrin Rehdanz and David Maddison
Hamburg University
University of Southern Denmark
Introduction
• Climate is an important input to many household activities
– Affects heating and cooling requirements
– Determines clothing and nutritional needs
– Limits recreational activities
• Impacts of an enhanced greenhouse effect are many and
diverse
– The effects of a changing climate might be positive or negative,
depending on time and place
• Little is known about peoples preferences for a particular
climate
• Can we determine the economic impacts of future climate
change to households/individuals?
• Is climate a determinant of happiness?
Happiness and Temperature
30
Temperature in coldest month
25
Nigeria
Dom.
Republic
Ghana
Brazil
India
Bangladesh
20
Phillipines
Puerto Rico
Venezuela
Colombia
Peru
Mexico
Israel
South Africa
Australia
Argentina New Zealand
Portugal Uruguay
Chile
Japan
Italy
Spain
Turkey
Montenegro
USA Ireland
Azerbaijan
France Great Britain
Georgia
Slovakia
Netherlands
Macedonia
Canada
Slovakia Croatia Serbia Germany
Iceland
Denmark
Hungary China
Romania
Czechia
Poland AustriaSw eden
Estonia
Moldova
South Korea
Norw ay
Arnenia
Ukraine
Latvia
Finland
Belarus Lithunia
15
10
5
0
-5
-10
Russia
-15
2
2,2
2,4
2,6
2,8
Happiness
3
3,2
3,4
3,6
Outline
• Why are we interested in peoples
preferences?
• Different valuation methods
• Happiness research
• Happiness in economics
• Regression analysis
Why investigating preferences?
• Tackling the problem of future climate changes
– has major implications for policies of development and
management
– is very costly
• Research work has generally focused on changes in
productivity in sectors
• Little attention has been drawn to climate as an input
to household activities
• To determine, if climate change is good or bad
indicators are needed
• How can we measure the preferences for
commodities not being traded on a market?
Environmental Valuation Methods
• Environmental goods are not traded on a
market
– How can we estimate the price nonetheless?
• Indirect valuation
– looks at surrogate markets (complements,
substitutes)
– e.g. hedonic pricing method, household production
function approach
• Direct valuation
– Hypothetical market
– e.g. contingent valuation
 Happiness research
– People are directly asked about their subjective
well-being
Happiness Research
• Domain of psychologists
• Analysis of individuals evaluation of life
– circumstances and comparisons to other people
– past experience and
– expectation of the future
• How is happiness measured?
– Different type of questions
– „Taking all together, would you say you are:
• very happy
• fairly happy
• not happy at all.“
• Decades of validation research
Happiness in Economics
• Uncommon in economics
• Objective position
– observable choices made by individuals
– preferences over goods and services
• Welfare
– ‚Satisfaction‘ with income
• More income enables individuals to satisfy more
needs
• ... and more goods and services can be consumed
• Consequently
• ... economic growth is one of the major objectives of
economic policy in any country
Income and Happiness
•
Well-being
–
–
•
Broader concept
Satisfation with life as a whole (happiness)
What is the relationship between income and
happiness?
1. Are persons with high income at a given point in
time happier than those with low income?
1. Are persons in rich countries happier than those
in poor countries?
1. Does an increase in income over time raise
happiness?
Income and Happiness (2)
1. On average richer people report higher
subjective well-being
– Relationship seems to be nonlinear
– Income does buy happiness
2. On average people living in rich countries
are happier than those living in poor
countries
3. Happiness appears to be relatively stable
and remaining flat with growing income
Sum up
• Standard 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 happiness
• So, what else determines differences in
happiness?
Recent Research
• Influence of unemployment, inflation and
recession
– Clark and Oswald (1994)
– Di Tella et al. (2001, forthcoming)
• Political and personal freedoms of a country
– Frey and Stutzer (2000)
• Environmental quality such as noise or air
pollution
– Van Praag and Baarsma (2001)
– Welsch (2002)
Research on the amenity value of
climate
• Hedonic approach
– Mainly applied to the US
– One of the few studies for Europe is Maddison and
Bigano (2003)
• Household production function approach
– Cross-country comparisons possible
– Investigates changes in the consumption of related
commodities
– Maddison (forthcoming)
Regression Analysis
• Regression analysis
– Investigates on the relationship between climate
and happiness
– Estimates the magnitude of the effects of changes
in climate
– Controlling for many other factors
• Model specification
– Which explanatory variables should be included?
– Which functional form is appropriate?
Variables
• Happiness data
– Self-reported happiness for 67 countries for different years
– 185 observations, 4 item response category
• Economic variables
–
–
–
–
–
GDP per capita in 1995 USD
Annual growth in GDP
Shortfall in income
Annual inflation rate
Annual rate of unemployment
• Demographic variables
–
–
–
–
–
Life expectancy
Literacy rate
Population density
Proportion of population above 65 years
Proportion of population below 15 years
Variables (2)
• Cultural differences
– Political and civil rights
– Religion
• Climate variables in various indices
– Temperature, precipitation
• Annually averaged means
• Extremes
• Number of months with a particular climate
Model specification
• Climate variables
– Minimum and maximum
– Annual averages and its squares
– Number of hot, cold, dry and wet months
• Modification
– Sampling weights
• Functional form
– Linear
HAPPYit =α+β1×GDPCAPit +β2×GDPCAPit2 +…+εit
– Semi-log, logistic
Results (Model 1)
Variable
Coefficient
CONSTANT
1.08E+01
GDPCAP
2.37E-05
GDPCAP2
-2.25E-10
GROWTH
5.25E-03
GDPMAX
-5.81E-05
INFLATION
7.55E-05
UNEMPLOYED
3.20E-03
YEAR
-4.37E-03
POPDEN
-4.60E-05
POP65
-1.59E+00
POP15
6.22E-01
URBAN
9.70E-04
LIFEEXP
1.07E-02
LITERATE
2.95E-04
FREEDOM
1.29E-02
Variable
Coefficient
BUDDHIST
-3.72E-01
HINDU
-1.83E-01
MUSLIM
1.33E-01
CHRIST
-5.85E-02
ORTHODOX
-1.51E-01
LATITUDE
1.42E-03
MAXTEMP
-1.81E-02
MINTEMP
1.39E-02
MAXRAIN
4.16E-04
MINRAIN
7.05E-04
No. Obs.
185
R-Squared
0.7918
F-Test (P>F)
0.0011
RESET Test (P>F)
0.0822
Results (2)
• Climate variables explain part of the
differences in self reported levels of
happiness
• People seem to be concerned about
– very low temperatures
– very high temperatures
– very 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
Climate Change
• Predicted changes in climate for 2 time slices (20102039 and 2040-2069)
• Temperature changes
– Most warming during winter months and in high latitudes
– Very warm summers will become more frequent
– Very cold winters will become very rare
• Changes in precipitation
– Great uncertainty
– Geographic differences in rainfall are becoming more
pronounced
– Increased precipitation in high latitudes
– More seasonal: drier summers and wetter winters in high
latitudes
Impact of Climate Change (2040)
Model 1 (2039)
400
Turkey
300
Macedonia
Romania
Spain
Israel
Portugal
Slovenia
South Africa
Nigeria
Bulgaria
200
Slovakia
Change in GDP per capita
Montenegro
Hungary
Switzerland
Argentinia
Austria
100
Czechia
Ghana
Moldova
Poland
Australia
Puerto Rico
Belgium
Ireland
3.4
Great Britain
Denmark
Germany
Phillipines
0
2
-100
Chile
Dom. Republic
New Zealand
2.2
2.4
Ukraine
2.6
Estonia
Russia
Latvia
2.8
Georgia
3
Peru
3.2
Japan
South Korea
Iceland
-200
Norway
Sweden
-300
Finland
Canada
-400
happiness
3.6
Impact of Climate Change (2040 and 2070)
600
400
Change in GDP per capita
0
2
2.2
Montenegro
Spain
Turkey
Israel
Portugal
South Africa
Slovenia
Nigeria
Switzerland
Hungary
Argentinia
Slovakia
Austria
Ghana Chile
Czechia
Australia
Dom. Republic
Moldova
Puerto Rico
New
Zealand
Poland
Czechoslovakia
GermanyPhillipines Belgium
Ireland
Estonia
2.4
2.8
3
3.2Great Britain 3.4
Russia 2.6
Peru
Japan
Georgia
Denmark
South Korea
Ukraine
Bulgaria
200
Macedonia
Romania
Iceland
-200
Norway
Sweden
Finland
Canada
-400
-600
2039
2069
-800
Happiness
3.6
Some Examples
600
Turkey
400
Change in GDP per Capita
200
Ghana
0
0
2000
2040
China
Netherlands
2070
Denmark
-200
-400
Sweden
Canada
Findland
-600
-800
Happiness
Conclusions
• Income does buy happiness
• … but can explain only a low proportion of
differences in happiness
• Among other variables climate is one
determinant of happiness
• We can use this information to calculate the
impact of climate change
• Our results support findings that
– High latitude countries might benefit from modest
global warming
– Low latitude countries would suffer losses
Conclusions
• Number of limitations:
– Climate and climate change differ not only
between countries, but also within
– Other climate variables
– Other consequences of climate change
• Indirect effects like extreme weather events
• Time it takes people to adapt