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Economic Growth, Income Distribution, and Climate Change

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Abstract

This paper explores how climate damage affects the long-run evolution of the economy. Climate change induced by greenhouse gas lowers profitability, reducing investment and cutting output in the short and long runs. Short-run employment falls due to deficient demand. In the long run, productivity growth is slower, lowering potential income levels. Climate policy can increase incomes and employment in the short and long runs, while a continuation of business-as-usual leads to a dystopian income distribution with affluence for few and high levels of unemployment for the rest.

Suggested Citation

  • Armon Rezai & Lance Taylor & Duncan Foley, 2017. "Economic Growth, Income Distribution, and Climate Change," SCEPA working paper series. 2017-11, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    • Handle: RePEc:epa:cepawp:2017-10
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    References listed on IDEAS

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    1. Robert U. Ayres & Benjamin Warr, 2009. "The Economic Growth Engine," Books, Edward Elgar Publishing, number 13324.
    2. Rezai, Armon & Taylor, Lance & Mechler, Reinhard, 2013. "Ecological macroeconomics: An application to climate change," Ecological Economics, Elsevier, vol. 85(C), pages 69-76.
    3. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
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    12. Ackerman, Frank & Stanton, Elizabeth A., 2012. "Climate risks and carbon prices: Revising the social cost of carbon," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 6, pages 1-25.
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    More about this item

    Keywords

    climate change; economic growth; integrated assessment; demand and distribution; energy productivity; unemployment;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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