The amenity value of the Italian climate

The hedonics literature suggests that locations with more favourable characteristics should display compensating wage and house price differentials. Specifying climate in terms of January and July averages, estimates of the marginal willingness to pay for small changes in climate variables are derived using this technique applied to Italian data. Italians would prefer a drier climate during the winter months, but higher summertime temperatures are shown to reduce welfare. In some locations households would prefer to see clearer skies. These results may have relevance to the task of determining the economic impact of future climate change.