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The Distributional Impact of Climate Change: Why Food Prices Matter

Author

Listed:
  • Eeshita Gupta

    (` Indian Statistical Institute and KPMG)

  • Bharat Ramaswami

    (` Department of Economics, Ashoka University)

  • E. Somanathan

    (` Indian Statistical Institute)

Abstract

We analyze the impact of agricultural productivity losses stemming from climate change in an economy without frictions. The first-order GDP impacts are expected to be small. But the poor have higher food budget shares and food prices will rise. How do distributional impacts diverge from the GDP impact? This is the question that is addressed. The paper considers two major sets of comparative statics: the effect of trade and the effect of economic growth. The model is calibrated to Indian data of 2009 and projections for 2030. The percentage loss of income for the landless is six times the GDP impact in a closed economy. Trade halves this effect and economic growth moderates it substantially. Despite the food price rise, nearly all farmers lose from climate change. The model is simple enough for impact channels to be transparent.

Suggested Citation

  • Eeshita Gupta & Bharat Ramaswami & E. Somanathan, 2021. "The Distributional Impact of Climate Change: Why Food Prices Matter," Working Papers 50, Ashoka University, Department of Economics.
    • Handle: RePEc:ash:wpaper:50
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    Cited by:

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    2. Maureen Teresa Odongo & Roseline Nyakerario Misati & Anne Wangari Kamau & Kethi Ngoka Kisingu, 2022. "Climate Change and Inflation in Eastern and Southern Africa," Sustainability, MDPI, vol. 14(22), pages 1-17, November.

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    More about this item

    Keywords

    Climate change;

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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