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

80 Pages Posted: 13 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: February 12, 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 general-equilibrium 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 general-equilibrium effect into a projection of climate-change impacts raises projected international inequality, with higher welfare losses across most of Africa.

Keywords: gains from trade, spatial correlation, inequality, climate change, El Ni~no, agricultural trade

JEL Classification: F11, F14, F18, O13, Q17, Q54, Q56

Suggested Citation

Dingel, Jonathan I. and Meng, Kyle and Hsiang, Solomon, Spatial Correlation, Trade, and Inequality: Evidence from the Global Climate (February 12, 2019). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2019-13, Available at SSRN: https://ssrn.com/abstract=3333239 or http://dx.doi.org/10.2139/ssrn.3333239

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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