Adaptation to climate change and economic growth in developing countries

Antony Millner and Simon Dietz

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Developing countries are vulnerable to the adverse effects of climate change, yet there is disagreement about what they should do to protect themselves from antic- ipated damages. In particular, it is unclear what the optimal balance is between investments in traditional productive capital (which increases output but is vulner- able to climate change), and investments in adaptive capital (which is unproductive in the absence of climate change, but ‘climate-proofs’ vulnerable capital). We show that, while it is unlikely that the optimal strategy involves no investment in adapta- tion, the scale and composition of optimal investments depends on empirical context. Our application to sub-Saharan Africa suggests, however, that in most contingencies it will be optimal to grow the adaptive sector more rapidly than the vulnerable sector over the coming decades, although it never exceeds 1% of the economy. Our sensi- tivity analysis goes well beyond the existing literature in evaluating the robustness of this finding.

Keywords: economic growth; climate change; adaptation; development (search for similar items in EconPapers)
JEL-codes: D61 O11 O40 Q54 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-agr, nep-dev, nep-ene, nep-env and nep-gro
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

Published in Environment and Development Economics, 2015, 20(3), pp. 380-406. ISSN: 1355-770X

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:57863

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