The Impact of Climate Change Skepticism on Adaptation in a Market Economy

23 Pages Posted: 13 Feb 2017

See all articles by Matthew E. Kahn

Matthew E. Kahn

University of Southern California; National Bureau of Economic Research (NBER)

Daxuan Zhao

Renmin University of China - School of Business

Date Written: February 2017

Abstract

Climate change will increase the risk of temperature extremes. Induced innovation could offset some of this threat. This paper explores the demand and supply for climate adaptation innovation in a market economy. Climate change induces this innovation because the rising temperatures increase demand for self protection products and for profit firms respond to these incentives. We then augment the model to introduce climate skeptics. Such skeptics reject the claim that the world is warming and thus do not increasingly demand adaptation products. We study how the economy's rate of adaptation innovation, cross city migration, real estate pricing and the welfare of agents with rational expectations are all affected by the presence of such skeptics.

Suggested Citation

Kahn, Matthew E. and Zhao, Daxuan, The Impact of Climate Change Skepticism on Adaptation in a Market Economy (February 2017). NBER Working Paper No. w23155. Available at SSRN: https://ssrn.com/abstract=2915982

Matthew E. Kahn (Contact Author)

University of Southern California ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Daxuan Zhao

Renmin University of China - School of Business ( email )

Beijing
China

HOME PAGE: http://daxuanzhao.weebly.com/

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