Some Like it (Less) Hot: Extracting Tradeoff Measures for Physically Coupled Amenities

The Urban Heat Island (UHI) provides direct evidence of how human activities contribute to a feedback loop that can result in multiple changes in ecosystem services by creating localized warming as well as differences in vegetated landscapes in areas surrounding the urban core. This paper develops a new spatial-temporal panel estimator to recover consistent estimates of household valuation of coupled landscape and temperature ecosystem services. Using data from Phoenix, AZ, we estimate a hedonic price function using an extension of the Hausman-Taylor model. The framework adapts the earlier Abbott Klaiber [2011] proposal to overcome challenges associated with the varying spatial scales of capitalization of landscape and temperature variables and the likelihood of spatially and temporally varying omitted variables. We find a positive and economically significant marginal willingness to pay (MWTP) for measures of green landscaping at multiple spatial scales and a separate, MWTP for a one degree (F) reduction in outdoor temperatures of $56 monthly.