Klaus Desmet, Esteban Rossi-Hansberg
We propose a dynamic spatial theory to analyze the geographic impact of climate change. Agricultural and manufacturing firms locate on a hemisphere. Trade is costly, firms innovate, and technology diffuses over space. Emissions from energy used in production contribute to the atmospheric stock of carbon, which increases temperature. Warming differs across latitudes and its effect on productivity varies across sectors. We calibrate the model to analyze how climate change affects the spatial distribution of economic activity, trade, migration, growth, and welfare. We assess quantitatively the impact of migration and trade restrictions, energy taxes, and innovation subsidies.
Areas of Focus: Climate Change, Climate Economics
Definition
Climate Change
Climate change is an urgent global challenge. EPIC research is helping to assess its impacts, quantify its costs, and identify an efficient set of policies to reduce emissions and adapt...
Definition
Climate Economics
Climate change will affect every sector of the economy, both locally and globally. EPIC research is quantifying these effects to help guide policymakers, businesses, and individuals working to mitigate and...