Working Paper: CEPR ID: DP9220
Authors: Klaus Desmet; Esteban Rossi-Hansberg
Abstract: We propose a dynamic spatial theory to analyze the geographic impact of climate change. Agricultural and manufacturing firms locate on a hemisphere. Trade across locations is costly, firms innovate, and technology diffuses over space. Energy used in production leads to emissions that contribute to the global stock of carbon in the atmosphere, which affects temperature. The rise in temperature differs across latitudes and sectors. We calibrate the model to analyze how climate change affects the spatial distribution of economic activity, trade, migration, growth, and welfare. We assess quantitatively the impact of migration and trade restrictions, energy taxes, and innovation subsidies.
Keywords: carbon; climate change; growth; international and regional trade; migration; mobility frictions; regional economics; space
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Temperature (C29) | Economic Productivity (O49) |
| Temperature (C29) | Migration Patterns (F22) |
| Temperature Changes (Q54) | Shifts in Agricultural and Manufacturing Firms Location (R32) |
| Rising Temperatures (Q54) | Enhanced Productivity in Northern Latitudes (O49) |
| Migration Restrictions (F22) | Welfare Losses (D69) |
| Energy Taxes and Innovation Subsidies (H23) | Mitigation of Economic Losses (H84) |