Climate Change Expectations and Endogenous Economic Growth in the Dice Model

36 Pages Posted: 7 Aug 2019

Date Written: 2019

Abstract

This paper studies the investment based growth rate effects of climate change. The analysis is based on the Integrated Assessment Model DICE by Nordhaus (2008). I depart from the original model, in that endogenous investments into a knowledge stock drive economic growth. Due to a negative capital accumulation as well as savings effect on the knowledge stock, climate change has a negative impact on gross income that lasts into the long run. In order to be able to quantify the growth rate effects, I calibrate the endogenous growth model version of DICE towards its exogenous growth counterpart. I find that in the exogenous growth model version of DICE, compared to its endogenous growth equivalent, in the social optimum, gross income is over-estimated by 2.3 % in 2100 and by 6.8 % in 2150.

Keywords: endogenous economic growth and climate change

JEL Classification: O440, Q540

Suggested Citation

Ciesielski, Anna, Climate Change Expectations and Endogenous Economic Growth in the Dice Model (2019). CESifo Working Paper No. 7761. Available at SSRN: https://ssrn.com/abstract=3432809

Anna Ciesielski (Contact Author)

ifo Institut ( email )

Poschingerstr. 5
Munich, DE 81679
Germany

HOME PAGE: http://www.cesifo-group.de/ciesielski-a

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