2021
  • Non-ICIMOD publication

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The distributional impact of climate change: Why food prices matter

  • Eshita Gupta
  • Bharat Ramaswami
  • E. Somanathan
  • Summary

We analyze the impact of agricultural productivity losses stemming from climate change in an economy without frictions. The first-order GDP impacts are expected to be small. But the poor have higher food budget shares and food prices will rise. How do distributional impacts diverge from the GDP impact? This is the question that is addressed. The paper considers two major sets of comparative statics: the effect of trade and the effect of economic growth. The model is calibrated to Indian data of 2009 and projections for 2030. The percentage loss of income for the landless is six times the GDP impact in a closed economy. Trade halves this effect and economic growth moderates it substantially. Despite the food price rise, nearly all farmers lose from climate change. The model is simple enough for impact channels to be transparent.