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Climate Change and Long-Run Factor Shares

Author

Listed:
  • Tianzi Liu
  • Ivan Rudik
  • Zebang Xu

Abstract

What is the long-run effect of climate change on how income is distributed between capital and labor? To answer this question, we develop an equilibrium growth model with labor- and capital-augmenting productivities that are affected by changes in temperature. We show that how temperature affects the long-run division of income only depends on the elasticity of substitution between labor and capital and how temperature affects capital-augmenting productivity. Labor-augmenting productivity and the elasticity of labor supply play no role in temperature's long-run effects on factor shares.

Suggested Citation

  • Tianzi Liu & Ivan Rudik & Zebang Xu, 2026. "Climate Change and Long-Run Factor Shares," AEA Papers and Proceedings, American Economic Association, vol. 116, pages 510-516, May.
    • Handle: RePEc:aea:apandp:v:116:y:2026:p:510-516
    DOI: 10.1257/pandp.20261025
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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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