|Author Name||Klaus DESMET (Universidad Carlos III) /Esteban ROSSI-HANSBERG (Princeton University)
|Creation Date/NO.||June 2013 13-E-057|
|Research Project||Theory and Empirics of Urban Growth and Spatial Structure
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We propose a dynamic spatial theory to analyze the geographic impact of climate change. Agricultural and manufacturing firms locate on a hemisphere. Trade across locations is costly; firms innovate; and technology diffuses over space. Energy used in production leads to emissions that contribute to the global stock of carbon in the atmosphere, which affects temperature.
The rise in temperature differs across latitudes, and its effect on productivity also varies across sectors. We calibrate the model to analyze how climate change affects the spatial distribution of economic activity, trade, migration, growth, and welfare. We assess quantitatively the impact of migration and trade restrictions, energy taxes, and innovation subsidies.