Article

Economic Value of Weather and Climate Forecasts

Richard W. Katz and Jeffrey K. Lazo

in The Oxford Handbook of Economic Forecasting

Published in print July 2011 | ISBN: 9780195398649
Published online September 2012 | | DOI: http://dx.doi.org/10.1093/oxfordhb/9780195398649.013.0021

Series: Oxford Handbooks

 Economic Value of Weather and Climate Forecasts

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  • Econometric and Statistical Methods and Methodology: General
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This article, which deals with methods for quantifying the economic value of weather and climate forecasts, is organized as follows. Section 2 provides some background on methods used to produce weather and climate forecasts, including the distinction between “weather” and “climate.” Section 3 introduces the concept of the economic value of imperfect information, based on the framework of decision theory and expected utility maximization. Section 4 reviews specific decision-analytic studies of the economic value of weather and climate forecasts. As a complement to the decision-theoretic approach, nonmarket valuation of weather and climate forecasts based on stated preference methods are described in Section 5. As an example, a recent survey of the public to obtain willingness-to-pay estimates for the economic value of improved hurricane forecasts is treated in detail. Finally, Section 6 consists of a discussion focusing on future research directions that could result in improved assessment of the economic value of weather and climate forecasts.

Keywords: economic value; weather forecast; climate forecast; imperfect information

Article.  10701 words. 

Subjects: Economics ; Econometric and Statistical Methods and Methodology: General ; Public Economics

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