The Return to Adaptation in a Changing Climate

Harrison Hong, Serena Ng and Jiangmin Xu

No 33824, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We quantify the economic return to adaptation in a changing climate. Our approach exploits the fact that extreme-weather arrivals are nonhomogeneous: we first estimate each country’s time-varying disaster arrival rate, then test whether per-disaster damage declines when risk is elevated—a key feature of risk-dependent adaptation. We apply this to tropical cyclones across 48 countries over 1980–2019. Indeed, cyclones do significantly less damage when the arrival rate has risen above its historical baseline. The finding survives placebo permutations, lagged-disaster controls, and two-way-fixed-effects critiques. Welfare gains reach several percent of GDP for the most exposed economies and scale sharply under climate projections.

JEL-codes: O1 O40 O47 Q50 Q54 Q56 (search for similar items in EconPapers)
Date: 2025-05
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