If You Cannot Take the Heat, Get Out of the Cerrado & Recovering the Equilibrium Amenity Cost of Nonmarginal Climate Change in Brazil

Abstract

This paper presents a technique for valuing large changes in non-marketed local attributes (e.g., climate amenities) without data describing prices of locally traded commodities like housing. A model of endogenous local sorting is used to identify individuals indirect utility functions, from which the value of the change in the local attribute is recovered, accounting for equilibrium impacts on markets for labor and locally traded commodities. Annual amenity costs of Brazilian climate change are estimated to be between $0.9 and $15.4 billion, depending upon the severity of the scenario considered and the role of migration costs.