The Households Preferences in Great Britain - Essay Example

This research demonstrates the households' preferences in Great Britain for climate amenities on the data collection derived from the hedonic price regression. The study concludes that British people prefer if there is more even distribution of precipitation during the seasons - drier summer season and wetter winters. Consequently, British households will benefit by a slight global warming. Because there are limited European studies conducted in this topic, comparisons are hard to find. Therefore, the results from this study can not be confirmed with certainty, or refused completely. The dominant contingent valuation approach has been used for many years in the research field work in Europe and unfortunately, is very likely to continue its prevalence in the near future, too. Comments: 1. The research on hedonic pricing presents interesting point of view, though very controversial in terms of statistical evidence. Since the area of study has been paid little attention. 2. In the article Kartin Rehdanz, presents an interesting and problematic view about the climate change impact on British households. Her study is based on investigating the amenity value of climate on households in Great Britain. She applies the hedonic price approach, which traces the marginal willingness of individuals to pay for changes in the climate. 3. The article claims that climate should be regarded as amenity and thus prices for houses in geographical regions with more sunny days on average have to affect the property price. The study is unique, because it uses for the first time geographic information system to derive the data. In comparison with other researches done, this one is exceptional, because attention is paid to problems of endogeneity when applying the census tract date. Furthermore, various specifications of the climate variables are taken into consideration and at the end, the study conducts an analyses if British households will gain from the global warming. 4. One of the shortcomings of the study is that besides Maddison's empirical work in 2001, there are no other investigations made on the amenity value of climate. Thus, barely any statistical comparisons can be derived or trends detected. Another issue with hedonic pricing model is that large level of the data used is taken by the administration and this causes certain boundaries. 5. The administrative boundaries create data limitations, which influence the final results and their interpretations. Thus, the evidence collected varies not only between different counties, but also within Great Britain. Roback (1982) first examined the effects of climate and how they affect both wages and the price of housing. Moreover, obtaining the required information and measures of local amenities, requires mainly distance evaluation. 6. A number of problems into this research also cause the two hedonic equations that have to be estimated. The regression analysis becomes too complicated as the two equations need to be determined. 7. All extensive data collection has to be taken from the specific local areas, which requires extra control of the variables on which the location choices are based. Therefore, the variables must be accurately chosen, to eliminate the variable biases, and to decrease the problems of multicollinearity. The further avoid difficulties in measurements, the proposal given in the articles divides Great Britain into smaller geographical areas, where the local amenities like the climate variables vary, but they are adjusted with the local housing market, because the labour market can not be modified (Englin, 1996). Gayer (2000) took an instrumental variable approach to a hedonic analysis. In his study he estimated a bi-causal relationship between house market prices and the environmental risk. 8. The starting point of all hedonic analysis if the presumption of equilibrium in hedonic markets - salary and rents are adjusted in such a way that people stay indifferent in what location they are living and working (Mler, 1977). Another problem is that where the mobility between different regions is limited, market segmentation develops. Therefore, the hedonic price function will not be fixed across different areas and the results will be biased (Strazheim, 1974). 9. In the article, the author includes table about the definition of the variables used in the regression as well as characteristics of the boroughs and metropolitan areas in Great Britain. A study conducted by Steinnes and Fisher (1974) affirms that there is an interdependent relationship between employment rates and residence. However, these two variables are correlated with other climate variable, which inevitable influence the overall results of the hedonic price analyses. But, on the other hand, not including any distance measures could also bias the results (Maddison, 2001). 10. The variables referring to climate are describes both in linear and squired terms. The squired terms allows Maddison (2001) to find out whether households would rather choose mild climate than one with extremes. Housing prices are affected by the climate change nonlinearly. 11. Additional hour of sunshine causes prices on housing to decline. Differences in data and regressions make it difficult to find an explanation for the different estimations in different studies. Findings based on seasonality of precipitation are close to those concluded by Englin (1996), but the extend of the impact is different. Moreover, Maddison (2001) determines that in his hedonic house price regression the average temperatures and average hours of sunshine are important. 12. Hulme et al. (2002) predict on the bases of the climate models that there will be an increase in temperatures with about 3 C by 2100 in the UK. Warm summers will occur more frequently and winters will be milder than before. Rainfalls are more likely to be seasonal with driers summer seasons and wetter winter season. Rainfalls will become more pronounced with Scotland having wetter seasons and South and East of England becoming drier (Hulme et at. 2002). Snowfall will dramatically decline throughout the UK. All those findings suggest that some areas in Great Britain will benefit more from the climate changes than others. 13. The regions that will gain more profit on average are those which have little range in rainfall and higher range in annual temperatures. Even though measurements are taken with little uncertainty, and the calculated changes reflect only three different climate variables, there is an increase in housing prices by location which seem to confirm the argument made of correlation between global climate changes and costs on housing. Specific comments: 1. "The marginal willingness" (p.6) should be explained in a more elaborate way 2. The model that supports the assumption made have to be summarized at the end of the paper. 3. The data for the climate variables (p.8) have to be compared with other studies conducted. 4. The implicit price of climate (p.17) is not commented extensively with explanations about the average, minimum and maximum variables. 5. Semi-log model (p.18) should be explained 6. The table with "Characteristics of climate variables for different climate change" needs longer commentary 7. In the conclusion starting on p.23 more summaries have to be generalized more clearly. Questionnaire: Reviewer Recommendation Term: Accept or Major Revision or Minor Revision or Reject Overall Reviewer Manuscript Rating: Between 0 and 100 Manuscript Rating Question(s): Scale Rating 1.1. The research question or hypothesis is plainly stated in one or two sentences. 1 = Yes, 2 = Need further work, 3 = Not stated [1-3] 1 1.2. The importance of the research is explained clearly in one or two paragraphs. 1 = Yes, 2 = Needs further work, 3 = Not stated [1-3] 1 1.3. The authors used the appropriate research methods for their work. 1 = Agree, 2 = Not my expertise, 3 = Disagree [1-3] 1 1.4. The findings are explained in detail on the manuscript. 1 = Yes, 2 = Needs further work, 3 = Not in detail [1-3] 1 1.5. There is a logical path of investigation throughout this paper. 1 = Agree, 2 = Needs further work, 3 = Disagree [1-3] 1 1.6. This research presents a contribution to the field in which it was conducted. 1 = Agree, 2 = Cannot say, 3 = Disagree [1-3] 1 1.7. The research provides a convincing line of argument with the use of references. 1 = Agree, 2 = Needs to explore more literature, 3 = Disagree [1-3] 2 2.1. This manuscript uses well written English: it is clear, concise, and correct (i.e., proper terminology and syntax) 1 = Agree, 2 = Needs further editing, 3 = Needs to be re-written [1-3] 1 2.2. The length of this manuscript matches its contribution: 1 = Yes, 2 = Needs further editing, 3 = No If 3, please specify to the author (under Comments to the Author) what would you "cut". [1-3] 1 2.3. This manuscript's abstract presents an intelligible approach, results, and conclusions: 1 = Appropriate as is, 2 = Needs further work, 3 = Needs to be re-written [1-3] 1 2.4. The title is coherent with the content of the paper: 1 = Appropriate as is, 2 = Needs further work, 3 = Needs to be re-written [1-3] 2 2.5. The research has illustrations/tables that are useful and of good quality. These are: 1 = Appropriate, 2 = Need minor edits, 3 = Need major edits [1-3] 1 3.1. How would you classify the focus of this research This research is mainly focused on 1 = ideas/theory, 2 = discrete facts, 3 = cannot say [1-3] 1 3.2. The research question or hypothesis is clearly derivative of the theory and literature review: 1 = agree, 2 = disagree, 3 = cannot say [1-3] 1 3.3. How would you rate the author's quality of interpretation and conclusion 1 = appropriate as is, 2 = needs further work, 3 = needs to be re-written [1-3] 1 Comments to Editor: References: Englin, J.: 1996, 'Estimating the Amenity Value of Rainfall', Regional Science 30, 273-283. Hulme, M., Jenkins, G.J., Lu, X., Turnpenny, J.R., Mitchell, T.D., Jones, R.G., Lowe, J., Murphy, J.M., Hassell, D., Boorman, P., McDonald, R. and Hill, S.: 2002, 'Climate Change Scenarios for the United Kingdom: The UKCIP02 Scientific Report', Tyndall Centre for Climate Change Research, School of Environmental Science, University of East Anglia, Norwich, UK. Gayer, T.: 2000, 'Neighborhood Demographics and the Distribution of Hazardous Waste Risks: An Instrumental Variables Estimation', Journal of Regulatory Economics 17, 131-155. Maddison, D.J.:, 2001, The Amenity Value of the Global Climate, Earthscan, London. Mler, K.-G.: 1977, 'A Note on the Use of Property in Estimating Marginal Willingness to Pay for Environmental Quality', Journal of Environmental Economics and Management 4, 355-369. Roback, J.: 1982, 'Wages, Rents, and the Quality of Life', Journal of Political Economy 90, 1257-1278. Steinnes, D.N. and Fisher, W.D.: 1974, 'An Econometric Model of Intraurban Location', Journal of Regional Science 14, 65-80. Straszheim, M.: 1974, 'Hedonic Estimation of Housing Market Prices: A Further Comment', Review of Economics and Statistics 56, 404-406. Read More

 

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