Climate Change Impacts on the Within-Country Income Distributions

58 Pages Posted: 27 Jul 2023 Last revised: 4 Mar 2024

See all articles by Martino Gilli

Martino Gilli

RFF-CMCC European Institute on Economics and the Environment; Bocconi University - Department of Economics

Matteo Calcaterra

RFF-CMCC European Institute on Economics and the Environment; Polytechnic University of Milan - Department of Management, Economics and Industrial Engineering

Johannes Emmerling

CMCC - Centro Euro-Mediterraneo sui Cambiamenti Climatici - European Institute onEconomy and the Environment (EIEE)

Francesco Granella

RFF-CMCC European Institute on Economics and the Environment; CMCC Foundation – Euro-Mediterranean Centre on Climate Change; Bocconi University

Date Written: July 25, 2023

Abstract

This paper investigates the relationship between climate change and income inequality, recognizing that the economic impacts of climate change are not uniform across different levels of income within and across countries. Using methods from the existing literature on climate and economic growth, we analyze the economic impact of rising temperatures by within-country income decile. Our findings suggest that climate change disproportionately affects the poorer segments of the population within countries, even after accounting for a country's ability to adapt to climate impacts, while the richest suffer the lowest damages. In a Reference scenario without additional climate action, we estimate that climate impacts could lead to an increase of the Gini index by up to six points, notably in Sub-Saharan Africa. Globally, we estimate that around three quarters of the total variation in climate impacts is due to between-country heterogeneity, and one-quarter is due to within-country inequality. We project damages to 2100 through the RICE50+ model and estimate the income elasticity of damages within countries. Our estimates indicate that the total economic impact of climate change is regressive, with an income elasticity of damages of 0.72 under our preferred specification. We find climate impacts to be especially regressive in poorer and hotter countries. While global damages are sensitive to the functional form of the damage function, the estimated income elasticity parameter is robust across different specifications.

Keywords: Climate change, climate damages, climate impacts, inequality, panel regression

JEL Classification: O11, O44, Q54, Q56

Suggested Citation

Gilli, Martino and Calcaterra, Matteo and Emmerling, Johannes and Granella, Francesco, Climate Change Impacts on the Within-Country Income Distributions (July 25, 2023). Available at SSRN: https://ssrn.com/abstract=4520461 or http://dx.doi.org/10.2139/ssrn.4520461

Martino Gilli (Contact Author)

RFF-CMCC European Institute on Economics and the Environment ( email )

Via Bergognone, 34
Milan, 20144
Italy

Bocconi University - Department of Economics ( email )

Via Roentgen 1
Milan, 20136
Italy

Matteo Calcaterra

RFF-CMCC European Institute on Economics and the Environment ( email )

Polytechnic University of Milan - Department of Management, Economics and Industrial Engineering ( email )

Via Lambruschini 4C - building 26/A
Milano, 20156
Italy

Johannes Emmerling

CMCC - Centro Euro-Mediterraneo sui Cambiamenti Climatici - European Institute onEconomy and the Environment (EIEE) ( email )

Via Bergognone, 34
Milan
Italy

Francesco Granella

RFF-CMCC European Institute on Economics and the Environment ( email )

CMCC Foundation – Euro-Mediterranean Centre on Climate Change ( email )

Lecce
Italy

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
356
Abstract Views
1,219
Rank
160,663
PlumX Metrics