Adaptation to Weather Shocks and Household Beliefs on Climate: Evidence from California

Abstract

Using a difference in differences framework, I show that California households exposed to a severe heat wave are differentially more likely to adopt central air conditioning units than those less exposed, controlling for historical climate. Using these “induced adopters” to predict take-up, I show that induced adopters have a significant increase in their summer energy demand 3 years following the heat wave, with insignificant effects on their winter electricity demand. In addition, I present a theoretical framework where household belief-updating about the climate rationalizes household learning about the climate that cannot be explained by myopia or alternative channels.

JEL Classification: Q54, Q47, D83