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"Economic Models"
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Evidence for sharp increase in the economic damages of extreme natural disasters
Climate change has increased the frequency and intensity of natural disasters. Does this translate into increased economic damages? To date, empirical assessments of damage trends have been inconclusive. Our study demonstrates a temporal increase in extreme damages, after controlling for a number of factors. We analyze event-level data using quantile regressions to capture patterns in the damage distribution (not just its mean) and find strong evidence of progressive rightward skewing and tail-fattening over time. While the effect of time on averages is hard to detect, effects on extreme damages are large, statistically significant, and growing with increasing percentiles. Our results are consistent with an upwardly curved, convex damage function, which is commonly assumed in climate-economics models. They are also robust to different specifications of control variables and time range considered and indicate that the risk of extreme damages has increased more in temperate areas than in tropical ones. We use simulations to show that underreporting bias in the data does not weaken our inferences; in fact, it may make them overly conservative.
Journal Article
Global non-linear effect of temperature on economic production
Economic productivity is shown to peak at an annual average temperature of 13 °C and decline at high temperatures, indicating that climate change is expected to lower global incomes more than 20% by 2100.
The cost of a warming climate
Temperature, and therefore climate change, can affect a country's economic productivity, but it has not been clear if rich and poor countries, or different aspects of economic productivity, show similar relationships. These authors use economic data from 166 countries for the years 1960 to 2010 to uncover a universal nonlinear relationship that reconciles earlier results. Economic productivity peaks at an annual average temperature of 13 °C, and the authors explore the likelihood of global economic contraction under future warming scenarios.
Growing evidence demonstrates that climatic conditions can have a profound impact on the functioning of modern human societies
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, but effects on economic activity appear inconsistent. Fundamental productive elements of modern economies, such as workers and crops, exhibit highly non-linear responses to local temperature even in wealthy countries
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. In contrast, aggregate macroeconomic productivity of entire wealthy countries is reported not to respond to temperature
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, while poor countries respond only linearly
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. Resolving this conflict between micro and macro observations is critical to understanding the role of wealth in coupled human–natural systems
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and to anticipating the global impact of climate change
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. Here we unify these seemingly contradictory results by accounting for non-linearity at the macro scale. We show that overall economic productivity is non-linear in temperature for all countries, with productivity peaking at an annual average temperature of 13 °C and declining strongly at higher temperatures. The relationship is globally generalizable, unchanged since 1960, and apparent for agricultural and non-agricultural activity in both rich and poor countries. These results provide the first evidence that economic activity in all regions is coupled to the global climate and establish a new empirical foundation for modelling economic loss in response to climate change
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, with important implications. If future adaptation mimics past adaptation, unmitigated warming is expected to reshape the global economy by reducing average global incomes roughly 23% by 2100 and widening global income inequality, relative to scenarios without climate change. In contrast to prior estimates, expected global losses are approximately linear in global mean temperature, with median losses many times larger than leading models indicate.
Journal Article
Climate change effects on agriculture: Economic responses to biophysical shocks
Agricultural production is sensitive to weather and thus directly affected by climate change. Plausible estimates of these climate change impacts require combined use of climate, crop, and economic models. Results from previous studies vary substantially due to differences in models, scenarios, and data. This paper is part of a collective effort to systematically integrate these three types of models. We focus on the economic component of the assessment, investigating how nine global economic models of agriculture represent endogenous responses to seven standardized climate change scenarios produced by two climate and five crop models. These responses include adjustments in yields, area, consumption, and international trade. We apply biophysical shocks derived from the Intergovernmental Panel on Climate Change’s representative concentration pathway with end-of-century radiative forcing of 8.5 W/m2. The mean biophysical yield effect with no incremental CO2 fertilization is a 17% reduction globally by 2050 relative to a scenario with unchanging climate. Endogenous economic responses reduce yield loss to 11%, increase area of major crops by 11%, and reduce consumption by 3%. Agricultural production, cropland area, trade, and prices show the greatest degree of variability in response to climate change, and consumption the lowest. The sources of these differences include model structure and specification; in particular, model assumptions about ease of land use conversion, intensification, and trade. This study identifies where models disagree on the relative responses to climate shocks and highlights research activities needed to improve the representation of agricultural adaptation responses to climate change.
Journal Article
Post-Keynesian empirical research and the debate on financial market development
\"This book integrates the concept of financial intermediaries with Post-Keynesian macroeconomic modeling to discuss the relationship between financial markets and systems and macroeconomic development by discussing key macroeconomic variables such as investment, savings, and productivity growth\"-- Provided by publisher.
Book
Monopsony in Motion
What happens if an employer cuts wages by one cent? Much of labor economics is built on the assumption that all the workers will quit immediately. Here, Alan Manning mounts a systematic challenge to the standard model of perfect competition.Monopsony in Motionstands apart by analyzing labor markets from the real-world perspective that employers have significant market (or monopsony) power over their workers. Arguing that this power derives from frictions in the labor market that make it time-consuming and costly for workers to change jobs, Manning re-examines much of labor economics based on this alternative and equally plausible assumption.
The book addresses the theoretical implications of monopsony and presents a wealth of empirical evidence. Our understanding of the distribution of wages, unemployment, and human capital can all be improved by recognizing that employers have some monopsony power over their workers. Also considered are policy issues including the minimum wage, equal pay legislation, and caps on working hours. In a monopsonistic labor market, concludes Manning, the \"free\" market can no longer be sustained as an ideal and labor economists need to be more open-minded in their evaluation of labor market policies.Monopsony in Motionwill represent for some a new fundamental text in the advanced study of labor economics, and for others, an invaluable alternative perspective that henceforth must be taken into account in any serious consideration of the subject.
eBook
Impact of Xylella fastidiosa subspecies pauca in European olives
Xylella fastidiosa is the causal agent of plant diseases that cause massive economic damage. In 2013, a strain of the bacterium was, for the first time, detected in the European territory (Italy), causing the Olive Quick Decline Syndrome. We simulate future spread of the disease based on climatic-suitability modeling and radial expansion of the invaded territory. An economic model is developed to compute impact based on discounted foregone profits and losses in investment. The model projects impact for Italy, Greece, and Spain, as these countries account for around 95% of the European olive oil production. Climatic suitability modeling indicates that, depending on the suitability threshold, 95.5 to 98.9%, 99.2 to 99.8%, and 84.6 to 99.1% of the national areas of production fall into suitable territory in Italy, Greece, and Spain, respectively. For Italy, across the considered rates of radial range expansion the potential economic impact over 50 y ranges from 1.9 billion to 5.2 billion Euros for the economic worst-case scenario, in which production ceases after orchards die off. If replanting with resistant varieties is feasible, the impact ranges from 0.6 billion to 1.6 billion Euros. Depending on whether replanting is feasible, between 0.5 billion and 1.3 billion Euros can be saved over the course of 50 y if disease spread is reduced from 5.18 to 1.1 km per year. The analysis stresses the necessity to strengthen the ongoing research on cultivar resistance traits and application of phytosanitary measures, including vector control and inoculum suppression, by removing host plants.
Publication