A replication of Pindyck’s willingness to pay: on the sacrifice needed to obtain results

We present a verification, an extension and a reanalysis of “Uncertain outcomes and climate change policy”, R. Pindyck, Journal of Environmental Economics and Management, 2012. As far as verification is concerned, we are able to reproduce the results provided in Pindyck’s work in many cases and convincingly confirm the quality of the work. Some discrepancies are present, they are due to rounding or related to specific sets of parametric values and do not change the economic interpretation or significance of the results. The re-estimation of the model with more recent data on climate change made available in 2014 shows that temperature increments are now deemed to be higher in mean but less dispersed. As a consequence, the willingness to pay doesn’t vary much with respect to the original paper. We also modify the functional form describing the impact of temperature increase on the growth rate of consumption and obtain much bigger and potentially problematic increments of the willingness to pay. Finally, the paper demonstrates that the numerical results are sensitive to a variety of technical settings used in the computations and suggests that great care is needed in obtaining estimates and employing results in policy discussions.