IDEAS home Printed from https://ideas.repec.org/p/wiw/wus045/5831.html
   My bibliography  Save this paper

Economic Growth, Income Distribution, and Climate Change

Author

Listed:
  • Rezai, Armon
  • Taylor, Lance
  • Foley, Duncan K.

Abstract

We present a model based on Keynesian aggregate demand and labor productivity growth to study 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

  • Rezai, Armon & Taylor, Lance & Foley, Duncan K., 2017. "Economic Growth, Income Distribution, and Climate Change," Ecological Economic Papers 17, WU Vienna University of Economics and Business.
    • Handle: RePEc:wiw:wus045:5831
    as

    Download full text from publisher

    File URL: https://epub.wu.ac.at/5831/
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    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.
    4. Marc Lavoie, 2014. "Post-Keynesian Economics: New Foundations," Post-Print hal-01343652, HAL.
    5. Lance Taylor & Armon Rezai & Rishabh Kumar & Nelson Barbosa & Laura Carvalho, 2017. "Wage increases, transfers, and the socially determined income distribution in the USA," Review of Keynesian Economics, Edward Elgar Publishing, vol. 5(2), pages 259-275, April.
    6. Rezai, Armon & van der Ploeg, Frederick, 2017. "Climate policies under climate model uncertainty: Max-min and min-max regret," Energy Economics, Elsevier, vol. 68(S1), pages 4-16.
    7. William Nordhaus, 2014. "Estimates of the Social Cost of Carbon: Concepts and Results from the DICE-2013R Model and Alternative Approaches," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 1(1), pages 000.
    8. David Kiefer & Codrina Rada, 2015. "Profit maximising goes global: the race to the bottom," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 39(5), pages 1333-1350.
    9. Gregor Semieniuk, 2016. "Fossil energy in economic growth: A study of the energy direction of technical change, 1950-2012," SPRU Working Paper Series 2016-11, SPRU - Science Policy Research Unit, University of Sussex Business School.
    10. Armon Rezai & Sigrid Stagl, 2016. "Ecological Macreconomics: Introduction and Review," Ecological Economics Papers ieep9, Institute of Ecological Economics.
    11. Lance Taylor & Duncan K Foley & Armon Rezai & Luiza Pires & Ozlem Omer & Ellis Scharfenaker, 2016. "Demand Drives Growth All The Way," SCEPA working paper series. 2016-04, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    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.
    13. Laura Carvalho & Armon Rezai, 2016. "Personal income inequality and aggregate demand," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 40(2), pages 491-505.
    14. C. C. von Weizsäcker, 1966. "Tentative Notes on a Two Sector Model with Induced Technical Progress," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 33(3), pages 245-251.
    15. Hall, Charles A.S. & Lambert, Jessica G. & Balogh, Stephen B., 2014. "EROI of different fuels and the implications for society," Energy Policy, Elsevier, vol. 64(C), pages 141-152.
    16. Nelson H. Barbosa‐Filho & Lance Taylor, 2006. "Distributive And Demand Cycles In The Us Economy—A Structuralist Goodwin Model," Metroeconomica, Wiley Blackwell, vol. 57(3), pages 389-411, July.
    17. Duncan K Foley, 2012. "Dilemmas of Economic Growth," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 38(3), pages 283-295.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eckhard Hein, 2017. "Post-Keynesian macroeconomics since the mid 1990s: main developments," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 14(2), pages 131-172, September.
    2. Rezai, Armon & Stagl, Sigrid, 2016. "Ecological Macreconomics: Introduction and Review," Ecological Economic Papers 9, WU Vienna University of Economics and Business.
    3. Robert A Blecker & Michael Cauvel & Y K Kim, 2022. "Systems estimation of a structural model of distribution and demand in the US economy," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 46(2), pages 391-420.
    4. Naqvi, Asjad & Stockhammer, Engelbert, 2018. "Directed Technological Change in a Post-Keynesian Ecological Macromodel," Ecological Economics, Elsevier, vol. 154(C), pages 168-188.
    5. Robert A. Blecker, 2016. "Wage-led versus profit-led demand regimes: the long and the short of it," Review of Keynesian Economics, Edward Elgar Publishing, vol. 4(4), pages 373-390, October.
    6. Stefan Ederer & Miriam Rehm, 2021. "Wealth inequality and aggregate demand," Metroeconomica, Wiley Blackwell, vol. 72(2), pages 405-424, May.
    7. Svartzman, Romain & Dron, Dominique & Espagne, Etienne, 2019. "From ecological macroeconomics to a theory of endogenous money for a finite planet," Ecological Economics, Elsevier, vol. 162(C), pages 108-120.
    8. Vinicius Curti Cícero & Daniele Tavani, 2024. "Institutional changes, effective demand and inequality: a structuralist model of secular stagnation," Working Papers PKWP2410, Post Keynesian Economics Society (PKES).
    9. Omer, Ozlem & Capaldo, Jeronim, 2023. "The risks of the wrong climate policy for developing countries: Scenarios for South Africa," Ecological Economics, Elsevier, vol. 211(C).
    10. Engelbert Stockhammer & Rafael Wildauer, 2016. "Debt-driven growth? Wealth, distribution and demand in OECD countries," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 40(6), pages 1609-1634.
    11. Carrillo-Maldonado, Paul & Nikiforos, Michalis, 2024. "Estimating a Time-Varying Distribution-Led Regime," Structural Change and Economic Dynamics, Elsevier, vol. 68(C), pages 163-176.
    12. Cem Oyvat & Oğuz Öztunalı & Ceyhun Elgin, 2020. "Wage‐led versus profit‐led demand: A comprehensive empirical analysis," Metroeconomica, Wiley Blackwell, vol. 71(3), pages 458-486, July.
    13. Fernando Rugitsky, 2016. "Growth, distribution, and sectoral heterogeneity: Reading the Kaleckians in Latin America," Economia, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 17(3), pages 265-278.
    14. Dafermos, Yannis & Nikolaidi, Maria & Galanis, Giorgos, 2017. "A stock-flow-fund ecological macroeconomic model," Ecological Economics, Elsevier, vol. 131(C), pages 191-207.
    15. Richard S.J. Tol, 2021. "Estimates of the social cost of carbon have not changed over time," Working Paper Series 0821, Department of Economics, University of Sussex Business School.
    16. Brenck, Clara & Carvalho, Laura, 2020. "The equalizing spiral in early 21st century Brazil: a Kaleckian model with sectoral heterogeneity," Structural Change and Economic Dynamics, Elsevier, vol. 55(C), pages 298-310.
    17. Stamegna, Marco, 2022. "A Kaleckian growth model of secular stagnation with induced innovation," MPRA Paper 113794, University Library of Munich, Germany.
    18. Stockhammer, Engelbert & Rabinovich, Joel & Reddy, Niall, 2017. "Distribution, wealth and demand regimes in historical perspective. USA, UK, France and Germany, 1855-2010," Economics Discussion Papers 2017-5, School of Economics, Kingston University London.
    19. Robert A. Blecker & Mark Setterfield, 2020. "On multi-sector and multi-technique models, production functions and Goodwin cycles: a reply to Libman," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 17(3), pages 295-306, November.
    20. Bovari, Emmanuel & Giraud, Gaël & Mc Isaac, Florent, 2018. "Coping With Collapse: A Stock-Flow Consistent Monetary Macrodynamics of Global Warming," Ecological Economics, Elsevier, vol. 147(C), pages 383-398.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wiw:wus045:5831. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: WU Library (email available below). General contact details of provider: https://research.wu.ac.at/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.