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Climate Change Expectations and Endogenous Economic Growth in the DICE Model

Anna Sophia Ciesielski

No 7761, CESifo Working Paper Series from CESifo Group Munich

Abstract: This paper studies the investment based growth rate effects of climate change. The analysis is based on the Integrated Assessment Model DICE by Nordhaus (2008). I depart from the original model, in that endogenous investments into a knowledge stock drive economic growth. Due to a negative capital accumulation as well as savings effect on the knowledge stock, climate change has a negative impact on gross income that lasts into the long run. In order to be able to quantify the growth rate effects, I calibrate the endogenous growth model version of DICE towards its exogenous growth counterpart. I find that in the exogenous growth model version of DICE, compared to its endogenous growth equivalent, in the social optimum, gross income is over-estimated by 2.3 % in 2100 and by 6.8 % in 2150.

Keywords: endogenous; economic; growth; and; climate; change (search for similar items in EconPapers)
JEL-codes: O44 Q54 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env and nep-gro
Date: 2019
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