Inequality and Climate Change: The Within-Countries Distributional Effects of Global Warming

Abstract

Climate change is already impacting several development outcomes, including economic growth, human health and mortality, agricultural productivity and even conflict. Moreover, the impact of climate change is expected to be unevenly distributed across locations and population groups. In particular, the worse effects of climate change are expected to be felt in low-income countries. Similarly, within countries, the most vulnerable to these effects are typically low-income regions and households. While the literature to date has provided evidence of the between-countries inequality-increasing effect of global warming, it has not yet done so for inequality within countries. In this paper, we empirically explore the connection between climate change and income distribution within countries. To do so, we build a global panel dataset combining gridded data on climate variables with gridded population data, country-level data on several income inequality measures (including interpersonal Gini coefficients and indices of concentration of income), gridded data on night-time lights to construct measures of spatial inequality, and data on several development outcomes. Using panel-data econometric techniques, we find a clear positive and statistically significant relationship between rising temperatures and increases in within-country inequality. The role of rising temperatures is robust to a range of controls, different specifications and estimation techniques. Finally, we explore potential mechanisms behind this temperature-inequality relationship.

Keywords: inequality, climate change, development

JEL Classification: O1