Economic Growth, Income Distribution & Climate Change

October 1, 2017

This paper explores how climate damage affects the long-run evolution of the economy.

Climate change induced by greenhouse gas lowers profitability, reducing investment and cutting output in the short and long runs. Short-run employment falls due to deficient demand. In the long run, productivity growth is slower, lowering potential income levels. Climate policy can increase incomes and employment in the short and long runs, while a continuation of business-as-usual leads to a dystopian income distribution with affluence for few and high levels of unemployment for the rest.

Authors: Armon Rezai, Lance Taylor and Duncan Foley
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