Spatial Correlation, Trade, and Inequality: Evidence from the Global Climate

85 Pages Posted: 15 Jan 2019 Last revised: 5 Feb 2019

See all articles by Jonathan I. Dingel

Jonathan I. Dingel

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Kyle Meng

University of California, Santa Barbara (UCSB) - Donald Bren School of Environmental Science & Management

Solomon Hsiang

University of California, Berkeley; National Bureau of Economic Research

Multiple version iconThere are 2 versions of this paper

Date Written: January 2019

Abstract

This paper shows that greater global spatial correlation of productivities can increase cross-country welfare dispersion by increasing the correlation between a country's productivity and its gains from trade. We causally validate this prediction using a global climatic phenomenon as a natural experiment. We find that gains from trade in cereals over the last half-century were larger for more productive countries and smaller for less productive countries when cereal productivity was more spatially correlated. Incorporating this role for spatial interdependence into a projection of climate-change impacts raises projected international inequality, with higher welfare losses across most of Africa.

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Suggested Citation

Dingel, Jonathan I. and Meng, Kyle and Hsiang, Solomon, Spatial Correlation, Trade, and Inequality: Evidence from the Global Climate (January 2019). NBER Working Paper No. w25447, Available at SSRN: https://ssrn.com/abstract=3315283

Jonathan I. Dingel (Contact Author)

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Kyle Meng

University of California, Santa Barbara (UCSB) - Donald Bren School of Environmental Science & Management ( email )

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Solomon Hsiang

University of California, Berkeley ( email )

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HOME PAGE: http://gspp.berkeley.edu/directories/faculty/solomon-hsiang

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