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Spatial Correlation, Trade, and Inequality: Evidence from the Global Climate

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  • Jonathan I. Dingel
  • Kyle C. Meng
  • Solomon M. Hsiang

Abstract

Global phenomena, such as climate change, often have local impacts that are spatially correlated. We show that greater spatial correlation of productivities can increase international inequality by increasing the correlation between a country’s productivity and its gains from trade. We confirm this prediction using a half-century of exogenous variation in the spatial correlation of agricultural productivities induced by a global climatic phenomenon. We introduce this general-equilibrium effect into projections of climate-change impacts that typically omit spatial linkages and therefore do not account for the global scope of climate change. We project greater international inequality, with higher welfare losses across Africa.

Suggested Citation

  • Jonathan I. Dingel & Kyle C. Meng & Solomon M. Hsiang, 2019. "Spatial Correlation, Trade, and Inequality: Evidence from the Global Climate," NBER Working Papers 25447, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:25447
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    2. Ishan Nath, 2021. "Climate Change, The Food Problem, and the Challenge of Adaptation through Sectoral Reallocation," Working Papers 21-29, Center for Economic Studies, U.S. Census Bureau.
    3. Ishan B. Nath, 2020. "The Food Problem and the Aggregate Productivity Consequences of Climate Change," NBER Working Papers 27297, National Bureau of Economic Research, Inc.
    4. Francisco Costa & Fabien Forge & Jason Garred & João Paulo Pessoa, 2023. "The Impact of Climate Change on Risk and Return in Indian Agriculture," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 85(1), pages 1-27, May.
    5. Remi Jedwab & Federico Haslop & Roman Zarate & Carlos Rodriguez-Castelan, 2023. "The Effects of Climate Change in the Poorest Countries: Evidence from the Permanent Shrinking of Lake Chad," Working Papers 2023-06, The George Washington University, Institute for International Economic Policy.
    6. Dávid Nagy & Dávid Krisztián Nagy, 2020. "Hinterlands, City Formation and Growth: Evidence from the U.S. Westward Expansion," Working Papers 1172, Barcelona School of Economics.
    7. Francisco Costa & Fabien Forge & Jason Garred & João Paulo Pessoa, 2020. "Climate Change and the Distribution of Agricultural Output," Working Papers 2003E, University of Ottawa, Department of Economics.
    8. Alan Feng & Haishi Li & Yulin Wang, 2023. "We Are All in the Same Boat: Cross-Border Spillovers of Climate Shocks through International Trade and Supply Chain," CESifo Working Paper Series 10402, CESifo.
    9. Sam Cosaert & Adrián Nieto & Konstantinos Tatsiramos, 2023. "Temperature and the Timing of Work," CESifo Working Paper Series 10681, CESifo.
    10. Oliva, Paulina, 2024. "Migration and the environment: A look across perspectives," Regional Science and Urban Economics, Elsevier, vol. 107(C).
    11. Mohd Nayyer Rahman & Nida Rahman & Abdul Turay & Munir Hassan, 2022. "Do Trade and Poverty Cause Each Other? Evidence from BRICS," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 14(1), pages 9-31, January.
    12. Geoffrey R. Dunbar & Walter Steingress & Ben Tomlin, 2023. "Climate Variability and International Trade," Staff Working Papers 23-8, Bank of Canada.
    13. Nath, Ishan, 2022. "Climate Change, The Food Problem, and the Challenge of Adaptation through Sectoral Reallocation," Conference papers 333404, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    14. Dylan Hogan & Wolfram Schlenker, 2024. "Non-linear relationships between daily temperature extremes and US agricultural yields uncovered by global gridded meteorological datasets," Nature Communications, Nature, vol. 15(1), pages 1-10, December.

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    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F18 - International Economics - - Trade - - - Trade and Environment
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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