The Distributional Impact of Climate Change: Why Food Prices Matter

We analyze the impact of agricultural productivity losses stemming from climate change in an economy without frictions. The first-order GDP impacts are expected to be small. But the poor have higher food budget shares and food prices will rise. How do distributional impacts diverge from the GDP impa...

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Bibliographic Details
Published inEconomics of disasters and climate change Vol. 5; no. 2; pp. 249 - 275
Main Authors Gupta, Eshita, Ramaswami, Bharat, Somanathan, E.
Format Journal Article
LanguageEnglish
Published Cham Springer International Publishing 2021
Subjects
Climate
Climate Change
Economics
Economics and Finance
Environmental Economics
Environmental Sociology
International Environmental Law
Natural Hazards
Original Paper
Climate change
Food prices
Distribution
General equilibrium
India
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Summary:We analyze the impact of agricultural productivity losses stemming from climate change in an economy without frictions. The first-order GDP impacts are expected to be small. But the poor have higher food budget shares and food prices will rise. How do distributional impacts diverge from the GDP impact? This is the question that is addressed. The paper considers two major sets of comparative statics: the effect of trade and the effect of economic growth. The model is calibrated to Indian data of 2009 and projections for 2030. The percentage loss of income for the landless is six times the GDP impact in a closed economy. Trade halves this effect and economic growth moderates it substantially. Despite the food price rise, nearly all farmers lose from climate change. The model is simple enough for impact channels to be transparent.
ISSN:2511-1280
2511-1299
DOI:10.1007/s41885-021-00084-5