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Local sectoral specialization in a warming world

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  • Bruno Conte
  • Klaus Desmet
  • Dávid Krisztián Nagy
  • Esteban Rossi-Hansberg

Abstract

This paper quantitatively assesses the world’s changing economic geography and sectoral specialization due to global warming. It proposes a two-sector dynamic spatial growth model that incorporates the relation between economic activity, carbon emissions and temperature. The model is taken to the data at the 1° by 1° resolution for the entire world. Over a 200-year horizon, rising temperatures consistent with emissions under Representative Concentration Pathway 8.5 push people and economic activity northwards to Siberia, Canada and Scandinavia. Compared with a world without climate change, clusters of agricultural specialization shift from Central Africa, Brazil and India’s Ganges Valley, to Central Asia, parts of China and northern Canada. Equatorial latitudes that lose agriculture specialize more in non-agriculture but, due to their persistently low productivity, lose population. By the year 2200, predicted losses in real GDP and utility are 6% and 15%, respectively. Higher trade costs make adaptation through changes in sectoral specialization more costly, leading to less geographic concentration in agriculture and larger climate-induced migration.

Suggested Citation

  • Bruno Conte & Klaus Desmet & Dávid Krisztián Nagy & Esteban Rossi-Hansberg, 2021. "Local sectoral specialization in a warming world," Journal of Economic Geography, Oxford University Press, vol. 21(4), pages 493-530.
    • Handle: RePEc:oup:jecgeo:v:21:y:2021:i:4:p:493-530.
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    File URL: http://hdl.handle.net/10.1093/jeg/lbab008
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    2. Richard S.J. Tol, 2020. "The Economic Impact of Weather and Climate," Video Library 2094, Department of Economics, University of Sussex Business School.
    3. Ishan Nath, 2021. "Climate Change, The Food Problem, and the Challenge of Adaptation through Sectoral Reallocation," Working Papers 21-29, Center for Economic Studies, U.S. Census Bureau.
    4. Cassin, Lesly & Melindi-Ghidi, Paolo & Prieur, Fabien, 2022. "Confronting climate change: Adaptation vs. migration in Small Island Developing States," Resource and Energy Economics, Elsevier, vol. 69(C).
    5. Laurence J. Kotlikoff & Felix Kubler & Andrey Polbin & Simon Scheidegger, 2021. "Can Today's and Tomorrow's World Uniformly Gain from Carbon Taxation?," NBER Working Papers 29224, National Bureau of Economic Research, Inc.
    6. Cascarano, Michele & Natoli, Filippo & Petrella, Andrea, 2022. "Entry, exit and market structure in a changing climate," MPRA Paper 112868, University Library of Munich, Germany.
    7. Rossi-Hansberg, Esteban, 2021. "The Economic Geography of Global Warming," 2021: Trade and Environmental Policies: Synergies and Rivalries, December 12-14, San Diego, CA, Hybrid 339385, International Agricultural Trade Research Consortium.
    8. Alan Feng & Haishi Li & Yulin Wang, 2023. "We Are All in the Same Boat: Cross-Border Spillovers of Climate Shocks through International Trade and Supply Chain," CESifo Working Paper Series 10402, CESifo.
    9. Per Krusell & Tony Smith, 2022. "Climate Change Around the World," Cowles Foundation Discussion Papers 2342, Cowles Foundation for Research in Economics, Yale University.
    10. Rudik, Ivan & Lyn, Gary & Tan, Weiliang & Ortiz-Bobea, Ariel, 2022. "The Economic Effects of Climate Change in Dynamic Spatial Equilibrium," Conference papers 333486, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    11. Olper, Alessandro & Maugeri, Maurizio & Manara, Veronica & Raimondi, Valentina, 2021. "Weather, climate and economic outcomes: Evidence from Italy," Ecological Economics, Elsevier, vol. 189(C).
    12. Kong, Xiangwen & Sun, Yuxuan & Qiu, Huanguang, 2023. "Climatic disasters and Conflicts in GMO Approval," 2023 Annual Meeting, July 23-25, Washington D.C. 335544, Agricultural and Applied Economics Association.
    13. Breckenfelder, Johannes & Maćkowiak, Bartosz & Marqués-Ibáñez, David & Olovsson, Conny & Popov, Alexander & Porcellacchia, Davide & Schepens, Glenn, 2023. "The climate and the economy," Working Paper Series 2793, European Central Bank.
    14. Juan S. Mora-Sanguinetti & Andrés Atienza-Maeso, 2023. ""Green regulation": a quantification of regulations related to renewable energies and climate change in Spain and France," Working papers 937, Banque de France.
    15. Delbridge, Victoria & Harman, Oliver & Oliveira Cunha, Juliana & Venables, Anthony J., 2022. "Sustainable urbanisation in developing countries: cities as places to innovate, trade, and work," LSE Research Online Documents on Economics 118027, London School of Economics and Political Science, LSE Library.

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    More about this item

    Keywords

    Global warming; sectoral specialization; trade; migration; geography; growth;
    All these keywords.

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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