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Climate Change Around the World

Author

Listed:
  • Anthony Smith

    (Yale University)

  • Per Krusell

    (Stockholm University)

Abstract

This paper builds a highly disaggregated, dynamic, general equilibrium model of interactions between the climate and the economy. The model consists of approximately 19,000 1-degree by 1-degree regions containing land. Regional climates (or average annual temperatures) respond differently to increases in the Earth's temperature, and regional productivity varies with regional temperature. Each region makes optimal consumption-savings decisions in response to its changing productivity in one of two extreme market structures: autarky and free capital mobility. The relationship between regional temperature and productivity has an inverse U-shape, calibrated so that the many-region model replicates estimates of aggregate global damages from climate change; the implied optimal temperature is approximately twelve degrees. The central result is that climate change affects regions very differently, with many regions gaining while others lose. Although a tax on carbon increases average welfare, there is a large disparity of views across regions, with both winners and losers. These findings depend very little on the structure of capital markets.

Suggested Citation

  • Anthony Smith & Per Krusell, 2017. "Climate Change Around the World," 2017 Meeting Papers 1582, Society for Economic Dynamics.
    • Handle: RePEc:red:sed017:1582
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    Cited by:

    1. 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.
    2. Yongyang Cai & William Brock & Anastasios Xepapadeas, 2023. "Climate Change Impact on Economic Growth: Regional Climate Policy under Cooperation and Noncooperation," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 10(3), pages 569-605.
    3. Yongyang Cai & William Brock & Anastasios Xepapadeas & Kenneth Judd, 2018. "Climate Policy under Cooperation and Competition between Regions with Spatial Heat Transport," DEOS Working Papers 1806, Athens University of Economics and Business.
    4. Stephie Fried, 2019. "Seawalls and Stilts: A Quantitative Macro Study of Climate Adaptation," 2019 Meeting Papers 898, Society for Economic Dynamics.
    5. Yongyang Cai & William Brock & Anastasios Xepapadeas & Kenneth Judd, 2019. "Climate Policy under Spatial Heat Transport: Cooperative and Noncooperative Regional Outcomes," Papers 1909.04009, arXiv.org.
    6. Cortina, Magdalena & Madeira, Carlos, 2023. "Exposures to climate change's physical risks in Chile," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 4(2).

    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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