Disaster Risk, Inequality, and Fiscal Sustainability

Anh H. Le (), Donghyun Park (), John Beirne and Gazi Uddin
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Anh H. Le: Goethe University Frankfurt
Donghyun Park: Asian Development Bank

No 750, ADB Economics Working Paper Series from Asian Development Bank

Abstract: This paper analyzes the effects of climate change on budgetary sustainability and inequality. Using panel data, the findings suggest that rising climate-related disaster risks raise government debt and undermine fiscal sustainability, with low-income households bearing the brunt of the impact. According to a New Keynesian Dynamic Stochastic General Equilibrium model, disaster risk generates recessions and increases inequality, particularly among “hand-to-mouth” agents. The paper also shows a considerable increase in sovereign debt due to disaster risk, and it recommends targeted transfers while cautioning against the fiscal cost of progressive taxes.

Keywords: climate change; disaster risk; physical risk; heterogeneous agent; fiscal policy (search for similar items in EconPapers)
JEL-codes: E20 E31 E32 E44 G12 Q54 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2024-11-07
New Economics Papers: this item is included in nep-dge, nep-env and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:ris:adbewp:0750

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