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On the Spatial Economic Impact of Global Warming

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  • Desmet, Klaus
  • Rossi-Hansberg, Esteban

Abstract

We propose a dynamic spatial theory to analyze the geographic impact of climate change. Agricultural and manufacturing firms locate on a hemisphere. Trade across locations is costly, firms innovate, and technology diffuses over space. Energy used in production leads to emissions that contribute to the global stock of carbon in the atmosphere, which affects temperature. The rise in temperature differs across latitudes and sectors. We calibrate the model to analyze how climate change affects the spatial distribution of economic activity, trade, migration, growth, and welfare. We assess quantitatively the impact of migration and trade restrictions, energy taxes, and innovation subsidies.

Suggested Citation

  • Desmet, Klaus & Rossi-Hansberg, Esteban, 2012. "On the Spatial Economic Impact of Global Warming," CEPR Discussion Papers 9220, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:9220
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    More about this item

    Keywords

    carbon; climate change; growth; international and regional trade; migration; mobility frictions; regional economics; space;
    All these keywords.

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • F10 - International Economics - - Trade - - - General
    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General

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