Climate Change Economics Over Time and Space

37 Pages Posted: 5 Mar 2024

See all articles by Klaus Desmet

Klaus Desmet

Southern Methodist University (SMU); Centre for Economic Policy Research (CEPR)

Esteban Rossi-Hansberg

University of Chicago

Multiple version iconThere are 2 versions of this paper

Date Written: March 2024

Abstract

With average temperature ranging from -20°C at the North Pole to 30°C at the Equator and with global warming expected to reach 1.4°C to 4.5°C by the year 2100, it is clear that climate change will have vastly different effects across the globe. Given the abundance of land in northern latitudes, if population and economic activity could freely move across space, the economic cost of global warming would be greatly reduced. But spatial frictions are real: migrants face barriers, trade and transportation are costly, physical infrastructure is not footloose, and knowledge embedded in clusters of economic activity diffuses only imperfectly. Thus, the economic cost of climate change is intimately connected to these spatial frictions. Building on earlier integrated assessment models that largely ignored space, in the past decade there has been significant progress in developing dynamic spatial integrated assessment models (S-IAMs) aimed at providing a more realistic evaluation of the economic cost of climate change, both locally and globally. This review article discusses this progress and provides a guide for future work in this area.

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Suggested Citation

Desmet, Klaus and Rossi-Hansberg, Esteban, Climate Change Economics Over Time and Space (March 2024). NBER Working Paper No. w32197, Available at SSRN: https://ssrn.com/abstract=4746807

Klaus Desmet (Contact Author)

Southern Methodist University (SMU) ( email )

6212 Bishop Blvd.
Dallas, TX 75275
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Esteban Rossi-Hansberg

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

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