Heat-Induced Mortality and Life-Cycle Welfare Along the Income Distribution

Higher atmospheric carbon concentrations increase extreme heat on both the extensive and intensive margins. We develop a stochastic life-cycle model in which daily heat shocks raise mortality risk, agents adapt to protect themselves, and health investment slows biological aging. We calibrate it to U.S. data and study the heterogeneous welfare consequences of a single damage channel—heat-induced mortality—showing how differences in exogenous wage-income profiles generate unequal damages along the income distribution. Comparing life-cycle outcomes under daily heat-shock distributions from an RCP 8.5 climate to an RCP 2.6 benchmark, we find that heat-induced mortality generates substantial and regressive welfare losses: average losses amount to 0.90 in CEV, ranging from 1.23 for the poorest income decile to 0.60 for the richest. The losses are concentrated among the elderly: conditional on survival to age 50, losses are substantially larger and more dispersed, ranging from 6.48 for the poorest decile to 1.32 for the richest. Welfare losses among poor agents are driven mainly by reduced survival, whereas foregone consumption due to higher adaptation expenditures plays a relatively larger role for high-income agents. Climate denial raises relative welfare losses among high-income agents by reducing their protective adaptation.