Spatial Correlation, Trade, and Inequality: Evidence from the Global Climate

Jonathan Dingel, Kyle Meng and Solomon M. Hsiang

No 25447, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Global phenomena, such as climate change, often have local impacts that are spatially correlated. We show that greater spatial correlation of productivities can increase international inequality by increasing the correlation between a country’s productivity and its gains from trade. We confirm this prediction using a half-century of exogenous variation in the spatial correlation of agricultural productivities induced by a global climatic phenomenon. We introduce this general-equilibrium effect into projections of climate-change impacts that typically omit spatial linkages and therefore do not account for the global scope of climate change. We project greater international inequality, with higher welfare losses across Africa.

JEL-codes: F11 F14 F18 O13 Q17 Q54 Q56 (search for similar items in EconPapers)
Date: 2019-01
New Economics Papers: this item is included in nep-agr, nep-env and nep-int
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