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The Effects of Climate Change on Income Inequality: Evidence from APEC Member Economies

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Abstract

This study empirically investigates the dynamic effects of climate change on within-country income inequality. Using panel data of 17 APEC member economies, I estimate impulse responses via the local projection method. Temperature and precipitation shocks, defined as deviations of temperature and precipitation from their historical norms, are also exploited to measure country-specific climate change. The empirical results reveal the following. First, temperature and precipitation shocks deteriorate income inequality measured by the Gini index; these effects are long-lasting. Moreover, asymmetric effects exist: heatwaves and droughts more significantly increase income inequality than coldwaves and floods. Lastly, current redistribution policies do not seem to effectively mitigate those adverse effects. I also discuss implications of carbon pricing/tax and environmental taxes related to income inequality.

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  • Kim, Wongi, 2021. "The Effects of Climate Change on Income Inequality: Evidence from APEC Member Economies," APEC Study Series 21-2, Korea Institute for International Economic Policy.
    • Handle: RePEc:ris:kiepas:2021_002
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    Keywords

    APEC; climate change; income inequality; redistribution policy;
    All these keywords.

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