Faraway, so close: coupled climate and economic dynamics in an agent based integrated assessment model

Francesco Lamperti, Giovanni Dosi, Mauro Napoletano, Andrea Roventini and Alessandro Sapio
Additional contact information
Francesco Lamperti: Scuola Superiore Sant'Anna, Pisa, Italy
Alessandro Sapio: Parthenope University of Naples, Naples, Italy

No 2017-10, Documents de Travail de l'OFCE from Observatoire Francais des Conjonctures Economiques (OFCE)

Abstract: In this paper we develop the first agent-based integrated assessment model, which offers an alternative to standard, computable general-equilibrium frameworks. The Dystopian Schumpeter meeting Keynes (DSK) model is composed of heterogeneous firms belonging to capital-good, consumption-good and energy sectors. Production and energy generation lead to greenhouse gas emissions, which affect temperature dynamics in a non-linear way. Increasing temperature triggers climate damages hitting, at the micro-level, workers’ labor productivity, energy efficiency, capital stock and inventories of firms. In that, aggregate damages are emerging properties of the out-of-equilibrium interactions among heterogeneous and boundedly rational agents. We find the DSK model is able to account for a wide ensemble of micro and macro empirical regularities concerning both economic and climate dynamics. Moreover, different types of shocks have heterogeneous impact on output growth, unemployment rate, and the likelihood of economic crises. Finally, we show that the magnitude and the uncertainty associated to climate change impacts increase over time, and that climate damages much larger than those estimated through standard IAMs. Our results point to the presence of tipping points and irreversible trajectories, thereby suggesting the need of urgent policy interventions

Keywords: Climate change; agent-based models; integrated assessment; macroeconomics dynamics; climate damages. (search for similar items in EconPapers)
JEL-codes: C63 Q40 Q50 Q54 (search for similar items in EconPapers)
Date: 2017-04
New Economics Papers: this item is included in nep-ene, nep-env, nep-hme and nep-tid
References: View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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Related works:
Journal Article: Faraway, So Close: Coupled Climate and Economic Dynamics in an Agent-based Integrated Assessment Model (2018)
Working Paper: Faraway, So Close: Coupled Climate and Economic Dynamics in an Agent-based Integrated Assessment Model (2018)
Working Paper: Faraway, So Close: Coupled Climate and Economic Dynamics in an Agent-based Integrated Assessment Model (2018)
Working Paper: Faraway, so close: coupled climate and economic dynamics in an agent-based integrated assessment model (2017)
Working Paper: Faraway, so close: coupled climate and economic dynamics in an agent-based integrated assessment model (2017)
Working Paper: Faraway, so Close: Coupled Climate and Economic Dynamics in an Agent-Based Integrated Assessment Model (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:fce:doctra:1710

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