The Impact of Climate Change on International Trade: A gravity model estimation

Alejandra Martínez Martínez, Silviano Esteve Pérez, Salvador Gil Pareja and Rafael Llorca Vivero
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Alejandra Martínez Martínez: Departamento de Estructura Económica, Facultad de Economía. Avda, de los Naranjos s/n. 46022, Valencia, Spain.
Silviano Esteve Pérez: University of Valencia and INTECO Joint Research Unit UJI-UV
Salvador Gil Pareja: University of Valencia and INTECO Joint Research Unit UJI-UV
Rafael Llorca Vivero: University of Valencia and INTECO Joint Research Unit UJI-UV
Authors registered in the RePEc Author Service: Silviano Esteve-Pérez and Salvador Gil-Pareja

No 2208, Working Papers from Department of Applied Economics II, Universidad de Valencia

Abstract: The aim of this paper is to analyse the impact of climate change on bilateral trade flows. To this end, we estimate a theory-grounded gravity model using bilateral trade flows on a sample of 65 countries during the period 1986-2016. We use temperatures and extreme weather events (and its consequences) as proxies for climate change. Overall, we find that international flows are less affected by the evolution of temperatures and events than domestic ones. However, there is an interesting heterogeneity across countries and across types of events. In particular, the results suggest that biological events (epidemics and insect infestation) have a negative differential impact on international flows relative to internal ones. Additionally, the differential average behaviour observed for China (the biggest exporter) is associated with the occurrence of storms (cyclones, tornados, convective hails, etc). Finally, our General Equilibrium estimations show that the aforementioned biological events have a remarkable negative impact on welfare.

Keywords: Climate change; Domestic flows; International flows; Temperatures; Weather events (search for similar items in EconPapers)
JEL-codes: C1 F14 F15 (search for similar items in EconPapers)
Date: 2022-09
New Economics Papers: this item is included in nep-agr, nep-env and nep-int
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