Climate Damage in Spatial Production Networks
Hubert Massoni (Université de Bologne)
Climate damage will not have a homogeneous impact on the economy. Strong heterogeneity in climate risks exists across locations and firms. The aim of this project is to investigate the role heterogeneity in climate risks plays in shaping the macro-level impacts of climate change – i.e., an attempt to provide micro-foundations to the climate damage function. A particular attention is given to the relocation of economic activity (labor and firms) across space as an adaptation mechanism, and to the importance of the production network structure in propagating climate shocks. The expected contribution of the project is threefold: (i) provide a theory of climate damage impacts in an endogenous spatial production network economy; (ii) support the predictions of the model with empirical findings (e.g., estimation of key parameters); (iii) simulate the shape of the damage function through simulations of climate change counterfactuals.