Economic Growth, Income Distribution, and Climate Change

Rezai, Armon and Taylor, Lance and Foley, Duncan K. (2017) Economic Growth, Income Distribution, and Climate Change. Ecological Economic Papers, 17. WU Vienna University of Economics and Business, Vienna.


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We present a model based on Keynesian aggregate demand and labor productivity growth to study 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.

Item Type: Paper
Additional Information: This research was supported by the Institute for New Economic Thinking (INET). Mr. Rezai is grateful for financial support from the Austrian Science Fund (FWF): J 3633. Research assistance from Luiza Pires and Özlem Ömer is gratefully acknowledged.
Keywords: climate change, economic growth, integrated assessment, demand and distribution, energy productivity, unemployment
Classification Codes: JEL H21, Q51, Q54
Divisions: Departments > Sozioökonomie > Ecological Economics
Depositing User: Daniel Schmelz
Date Deposited: 27 Oct 2017 08:27
Last Modified: 22 Oct 2019 00:41
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