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Unequal gains: Assessing the aggregate and spatial economic impact of global warming

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Climate change is affecting, and will affect, the economic geography of the world in significant ways, from warmer climates that can disrupt production patterns and the quality of life across regions, to sea level-rise and the resulting flooding of coastal cities.

These effects are, evidently, highly heterogeneous across space. Warming negatively affects locations that are already uncomfortably warm, while it can potentially benefit some of the coldest places; flooding only affects coastal areas.

This large spatial heterogeneity in the impact of climate change implies that, in order to understand and predict its overall economic cost, we need to understand its local economic impact and the redistribution of resources that it will generate across regions.

Most integrated assessment models (IAMs) used in the climate literature focus on the dynamic implications of climate change, but abstract from spatial heterogeneity and its implications (e.g. Nordhaus 2017, IPCC 2013).

When they do include regions, there are only a few of them and the interactions of economic agents across space are extremely limited. As such, these models do not incorporate the impact that changes in the distribution of economic activity will have on the fortunes of particular locations, or the implications that these changes will […]

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