Quantifying Climate Damages When Regions Trade: A Structural Gravity Approach

Jeanne Astier, Geoffrey Barrows, Raphael Calel, Helene Ollivier and Hélène Ollivier

No 12602, CESifo Working Paper Series from CESifo

Abstract: This paper presents a method for estimating treatment effects of local climate shocks when regions trade with each other. Because trade creates spillovers, comparing the change in outcomes of regions with different exposure to shocks leads to biased estimates. We model these between-region spillovers using standard assumptions from international trade theory, and develop a model-consistent strategy for estimating key parameters and deriving counterfactuals. We use our estimation strategy to revisit the literature on the impact of climate change on gross output. We find that accounting for trade spillovers yields substantially larger climate damage projections.

Keywords: climate change; spillovers; trade; gravity (search for similar items in EconPapers)
JEL-codes: L1 L5 Q48 (search for similar items in EconPapers)
Date: 2026
New Economics Papers: this item is included in nep-agr
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