Abstract: Climate change involves not only changes in mean climatic conditions, but also in the degree of climate variability, i.e. how much weather fluctuates year-to-year around the mean. This paper quantifies the welfare impact of climate variability and assesses the role of trade integration as a climate adaptation strategy. I measure the effect of weather fluctuations on agricultural yields by combining weather data from a 0.5◦ × 0.5◦ grid with agricultural production series for 23 different crops in 1961-2022. I then use climate projections from general circulation models to assess the change in climate variability in the future under an RCP8.5 emissions scenario. I calibrate a quantitative trade model with multiple sectors for all 54 African countries and quantify the impact of TFP shocks from weather fluctuations on household consumption. According to the results, climate variability is expected to generate annual consumption-equivalent losses of 1.31% in 2015-2100 for the average African household and of 6.7% among the top five most affected countries. If all African countries were assigned trade costs equivalent to the 90th percentile of trade openness, the welfare impact of future climate variability would be reduced by 27%, on average. However, differences in comparative advantage in agriculture generate heterogeneous effects across space. While households in the top five beneficiary countries see decreases of more than 75%, those in the bottom five experience a 50% average increase in welfare losses.
Coping with Climate Shocks: Food Security in a Spatial Framework, IMF Working Paper 2023/166
Joint with John Spray and D. Filiz Unsal
Abstract: We develop a quantitative spatial general equilibrium model with heterogeneous households and multiple locations to study households’ vulnerability to food insecurity from climate shocks. In the model, households endogenously respond to negative climate shocks by drawing-down assets, importing food and temporarily migrating to earn additional income to ensure sufficient calories. Because these coping strategies are most effective when trade and migration costs are low, remote households are more vulnerable to climate shocks. Food insecure households are also more vulnerable, as their proximity to a subsistence requirement causes them to hold a smaller capital buffer and more aggressively dissave in response to shocks, at the expense of future consumption. We calibrate the model to 51 districts in Nepal and estimate the impact of historical climate shocks on food consumption and welfare. We estimate that, on an annual basis, floods, landslides, droughts and storms combined generated GDP losses of 2.3 percent, welfare losses of 3.3 percent for the average household and increased the rate of undernourishment by 2.8 percent. Undernourished households experience roughly 50 percent larger welfare losses and those in remote locations suffer welfare losses that are roughly two times larger than in less remote locations (5.9 vs 2.9 percent). In counterfactual simulations, we show the role of better access to migration and trade in building resilience to climate shocks.
Agglomeration Forces and the Spatial Distribution of Economic Activity
Abstract: This paper quantifies the relative importance of three sources of agglomeration benefits for the spatial distribution of the US economy: the access to ideas, labour, and goods. I develop a quantitative spatial model to structurally recover industry-location productivities and estimate agglomeration spillover parameters for 26 tradable industries. I decompose the observed spatial distribution of employment into the separate contributions of the different forces and simulate counterfactual economies in which they are absent. Knowledge spillovers have the most sizable effect on aggregate economic activity, whose elimination generates a 26% reduction in the index of spatial concentration. This is followed by access to goods, with a 20% reduction, and then access to labour with 6%. The relative importance of each force depends crucially on the type of industry and spatial range considered.
Climate Change, Food Insecurity and Remittances in Nepal, Nepal: Selected Issues, IMF Staff Country Reports, 2023(159)
Joint with Goel A., Spray J., and Unsal F
Economic Effects of Climate Change and Food Insecurity in Niger, IMF Selected Issues Paper No. 2023/009
Joint with Diallo, Y., Kaho, A
Climate Change and Food Insecurity in Sub-Saharan Africa, IMF Departmental Paper No 2022/016
Joint with Farid, M., Fayad, D., Kemoe, L., Lanci, L., Mitra, P., Muehlschlegel, T., Okou, C., Spray, J., Tuitoek, K. & Unsal, F