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The Impact of Climate Change on International Trade: A gravity model estimation

Author

Listed:
  • Alejandra Martínez Martínez

    (Departamento de Estructura Económica, Facultad de Economía. Avda, de los Naranjos s/n. 46022, Valencia, Spain.)

  • Silviano Esteve Pérez

    (University of Valencia and INTECO Joint Research Unit UJI-UV)

  • Salvador Gil Pareja

    (University of Valencia and INTECO Joint Research Unit UJI-UV)

  • Rafael Llorca Vivero

    (University of Valencia and INTECO Joint Research Unit UJI-UV)

Abstract

The aim of this paper is to analyse the impact of climate change on bilateral trade flows. To this end, we estimate a theory-grounded gravity model using bilateral trade flows on a sample of 65 countries during the period 1986-2016. We use temperatures and extreme weather events (and its consequences) as proxies for climate change. Overall, we find that international flows are less affected by the evolution of temperatures and events than domestic ones. However, there is an interesting heterogeneity across countries and across types of events. In particular, the results suggest that biological events (epidemics and insect infestation) have a negative differential impact on international flows relative to internal ones. Additionally, the differential average behaviour observed for China (the biggest exporter) is associated with the occurrence of storms (cyclones, tornados, convective hails, etc). Finally, our General Equilibrium estimations show that the aforementioned biological events have a remarkable negative impact on welfare.

Suggested Citation

  • Alejandra Martínez Martínez & Silviano Esteve Pérez & Salvador Gil Pareja & Rafael Llorca Vivero, 2022. "The Impact of Climate Change on International Trade: A gravity model estimation," Working Papers 2208, Department of Applied Economics II, Universidad de Valencia.
    • Handle: RePEc:eec:wpaper:2208
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    References listed on IDEAS

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    More about this item

    Keywords

    Climate change; Domestic flows; International flows; Temperatures; Weather events;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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