Sophie Mathes, EPGE Brazilian School of Economics and Finance

This study combines the seminal ideas of Tiebout (1956) and Grossman (1972) to develop a new empirical framework for evaluating treatments that have spatially differentiated effects on health and environmental quality. Individuals are modeled as choosing a residential location based on their heterogeneous preferences for local public goods and their beliefs about how their location choices will affect the future evolution of their health. Thus, the choice of residential location constitutes a health investment, in addition to providing current and future consumption values of local public goods. To estimate the dynamic model of location choice, I employ a sample of 4.5 million seniors from 2001-2013. Seniors’ preferences for public goods, private goods, and their rates of intertemporal substitution between health and consumption are allowed to vary flexibly with age and health. Results suggest that seniors’ willingness-to-pay (WTP)for warmer winters is uniformly positive, while WTP to avoid warmer summers varies with age and health. Their average annual WTP to avoid future climate change in the U.S. predicted under a “business as usual” scenario for global carbon emissions ranges from $1,431 for older, sicker groups who are more vulnerable to climate change’s negative effects on health to -$3,813 for younger, healthier groups, who value warmer winters and are relatively resilient and mobile.

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