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The Impact of Climate Change Skepticism on Adaptation in a Market Economy

Listed author(s):
  • Matthew E. Kahn
  • Daxuan Zhao

Climate change will increase the risk of temperature extremes. Induced innovation could offset some of this threat. This paper explores the demand and supply for climate adaptation innovation in a market economy. Climate change induces this innovation because the rising temperatures increase demand for self protection products and for profit firms respond to these incentives. We then augment the model to introduce climate skeptics. Such skeptics reject the claim that the world is warming and thus do not increasingly demand adaptation products. We study how the economy's rate of adaptation innovation, cross city migration, real estate pricing and the welfare of agents with rational expectations are all affected by the presence of such skeptics.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 23155.

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Date of creation: Feb 2017
Handle: RePEc:nbr:nberwo:23155
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