Working Paper: NBER ID: w28163
Authors: Bruno Conte; Klaus Desmet; Dvid Krisztian Nagy; Esteban Rossi-Hansberg
Abstract: This paper quantitatively assesses the world's changing economic geography and sectoral specialization due to global warming. It proposes a two-sector dynamic spatial growth model that incorporates the relation between economic activity, carbon emissions, and temperature. The model is taken to the data at the 1° by 1° resolution for the entire world. Over a 200-year horizon, rising temperatures consistent with emissions under Representative Concentration Pathway 8.5 push people and economic activity northwards to Siberia, Canada, and Scandinavia. Compared to a world without climate change, clusters of agricultural specialization shift from Central Africa, Brazil, and India's Ganges Valley, to Central Asia, parts of China and northern Canada. Equatorial latitudes that lose agriculture specialize more in non-agriculture but, due to their persistently low productivity, lose population. By the year 2200, predicted losses in real GDP and utility are 6% and 15%, respectively. Higher trade costs make adaptation through changes in sectoral specialization more costly, leading to less geographic concentration in agriculture and larger climate-induced migration.
Keywords: climate change; economic geography; sectoral specialization; migration; trade
JEL Codes: F18; O13; O41; Q56; R11; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Rising temperatures associated with emissions under RCP 85 (Q54) | Northward shift of people and economic activity (R23) |
| Rising temperatures (Q54) | Clusters of agricultural specialization shift from Central Africa, Brazil, and India's Ganges Valley to Central Asia, parts of China, and Northern Canada (N52) |
| Equatorial latitudes losing agricultural viability (Q15) | Specialization more in non-agriculture (Q19) |
| Specialization more in non-agriculture (Q19) | Population declines due to low productivity (J11) |
| Higher trade costs (F12) | Increased climate-induced migration (F22) |
| Rising temperatures (Q54) | Decrease in real GDP (E20) |
| Rising temperatures (Q54) | Decrease in utility (D11) |