Transfers from nature: A macro study of the unequal effects of climate change | Stephie Fried

Stephie Fried is a Senior Economist at the Federal Reserve Bank of San Francisco and an affiliate of the CESifo research network. Her research focuses on the economic impacts of climate chance and climate policies. 

Stephie will be discussing the paper ‘Transfers from nature: A macro study of the unequal effects of climate change’.

Abstract

Will climate change worsen US inequality? This paper develops a macro heterogeneous-agent model to quantify the distributional impacts of higher temperatures in the US. Households adapt to temperature by using energy and equipment for heating and cooling. A key insight from the model is that outdoor temperature acts as a transfer from nature to households. Higher temperatures from climate change affect these transfers. I find that the welfare effects of climate change vary substantially with income, increasing welfare inequality in all but the hottest region. Accounting for this income heterogeneity considerably increases the aggregate welfare cost of climate change.