Climate change and inequality in a global context. Exploring climate induced disparities and the reaction of economic systems

This paper investigates the impact of climate change on within-country income inequality with reference to over 150 nations in 2003-2017. Specifically, we control for a large number of determinants of income disparities detected by extant literature, and focus on agriculture as one of the most crucial channels in the climate change-inequality nexus. We find that temperature increases and precipitation anomalies have significant adverse effects on within-country inequality, especially in the presence of larger shares of population in rural areas and of workers in agriculture. Furthermore, our results show that the diversification of inward FDIs across value chain activities constitutes a resilience-enhancing factor which allows to alleviate the adverse consequences of climate change on income distribution.