The public costs of climate-induced financial instability

Lamperti, Francesco; Bosetti, Valentina; Roventini, Andrea; Tavoni, Massimo

doi:10.1038/s41558-019-0607-5

Cited by 104 publications

(57 citation statements)

References 55 publications

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“…Notably, ABM can be used to model systems out-of-equilibrium [36], which allows the exploration of non-marginal changes and regime shifts [37]. ABM is increasingly becoming the mainstream method to merge a variety of data on behavioural traits, with adaptive learning, dynamics of institutions and spatial or environmental changes essential to study socio-economic impacts of climate change [38,39]. In the flood domain, ABM has been used to study feedbacks between land use and inundation [40], evolution of housing markets in flood-prone areas [41,42], and uptake of flood insurance [29].…”

Section: Evolving Climate-driven Flood Risks In Artificial Societiesmentioning

confidence: 99%

Repetitive floods intensify outmigration and climate gentrification in coastal cities

Koning

Filatova

2020

Environ. Res. Lett.

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Recent floods in America, Europe, Asia and Africa reminded societies across the world of the need to revisit their climate adaptation strategies. Rapid urbanization coinciding with a growing frequency and intensity of floods requires transformative actions in cities worldwide. While abandoning flood prone areas is sometimes discussed as a public climate adaptation option, little attention is paid to studying cumulative impacts of outmigration as an individual choice. To explore the aggregated consequences of households' outmigration decisions in response to increasing flood hazards, we employ a computational agent-based model grounded in empirical heuristics of buyers' and sellers' behaviour in a flood-prone housing market. Our results suggest that pure market-driven processes can cause shifts in demographics in climate-sensitive hotspots placing low-income households further at risk. They get trapped in hazard zones, even when individual risk perceptions and behavioural location preferences are independent of income, suggesting increasing climate gentrification as an outcome of market sorting.

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Section: Evolving Climate-driven Flood Risks In Artificial Societiesmentioning

confidence: 99%

Repetitive floods intensify outmigration and climate gentrification in coastal cities

Koning

Filatova

2020

Environ. Res. Lett.

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“…It is also reported that the expected "climate value at risk" for global financial assets was 1.8% under a BAU emissions scenario (16.9% for the 99th percentile), falling to 1.2% (9.2% for the 99th percentile) under a 2°C scenario (Dietz et al 2016). A study using an agent-based climate-macroeconomic model predicted that banking crises would be more frequent in the face of climate change (by 26-248%) and that propping up insolvent banks would lead to an annual fiscal burden of around 5-15% of GDP, doubling the ratio of public debt to GDP (Lamperti et al 2019). Dafermos et al (2018) argued that the liquidity of firms is likely to deteriorate, leading to higher default rates and damaging both financial and non-financial corporate sectors.…”

Section: Insurance and Financementioning

confidence: 99%

Identifying key processes and sectors in the interaction between climate and socio-economic systems: a review toward integrating Earth–human systems

Tachiiri

Matsumoto

2021

Prog Earth Planet Sci

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For the purpose of identifying the key processes and sectors involved in the interaction between Earth and socio-economic systems, we review existing studies on those processes/sectors through which the climate impacts socio-economic systems, which then in turn affect the climate. For each process/sector, we review the direct physical and ecological impacts and, if available, the impact on the economy and greenhouse gas (GHG) emissions. Based on this review, land sector is identified as the process with the most significant impact on GHG emissions, while labor productivity has the largest impact on the gross domestic product (GDP). On the other hand, the energy sector, due to the increase in the demand for cooling, will have increased GHG emissions. Water resources, sea level rise, natural disasters, ecosystem services, and diseases also show the potential to have a significant influence on GHG emissions and GDP, although for most of these, a large effect was reported only by a limited number of studies. As a result, more studies are required to verify their influence in terms of feedbacks to the climate. In addition, although the economic damage arising from migration and conflict is uncertain, they should be treated as potentially damaging processes.

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“…Economists before us have also developed empirically grounded agent-based models to analyse middle to long term impacts of policy on economic growth (Dosi et al 2013;Dawid et al 2014). And more recently, agent-based models have been used to analyze potential economic impacts of climate change (Lamperti et al 2019). Our paper adds to this literature by providing an agent-based analysis of the short-term impact of economic shocks in a fully calibrated model at a higher level of granularity.…”

Section: Out-of-equilibrium Equilibrium Modelsmentioning

confidence: 99%

The Economic Cost of Covid Lockdowns: An Out-of-Equilibrium Analysis

Mandel

Veetil

2020

SSRN Journal

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This paper estimates the cost of the lockdown of some sectors of the world economy in the wake of COVID-19. We develop a multi sector disequilibrium model with buyer-seller relations between agents located in different countries. The production network model allows us to study not only the direct cost of the lockdown but also indirect costs which emerge from the reductions in the availability of intermediate inputs. Agents determine the quantity of output and the proportions in which to combine inputs using prices that emerge from local interactions. The model is calibrated to the world economy using input-output data on 56 industries in 44 countries including all major economies. Within our model, the lockdowns are implemented as partial reductions in the output of some sectors using data on sectoral decomposition of capacity reductions. We use computational experiments to replicate the temporal sequence of the lockdowns implemented in different countries. World output falls by 7% at the early stage of the crisis when only China is under lockdown and by 23% at the peak of the crisis when many countries are under a lockdown. These direct impacts are amplified as the shock propagates through the world economy because of the buyer-seller relations. Supply-chain spillovers are capable of amplifying the direct impact by more than two folds. Naturally, the substitutability between intermediate inputs is a major determinant of the amplification. We also study the process of economic recovery following the end of the lockdowns. Price flexibility and minor technological adaptations help in reducing the This article is part of the Topical Collection on Economics of COVID-19 Mandel acknowledges support from the H2020 framework programme via grant 884565-TIPPING.plus Mandel acknowledges the support by the Project ExSIDE. This work has received funding from the European Union's Horizon 2020 research and innovation programme under the Marie 36 Sk lodowska-Curie grant agreement No 721846, "Expectations and Social Influence Dynamics in Economics (ExSIDE)".

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The public costs of climate-induced financial instability

Cited by 104 publications

References 55 publications

Repetitive floods intensify outmigration and climate gentrification in coastal cities

Repetitive floods intensify outmigration and climate gentrification in coastal cities

Identifying key processes and sectors in the interaction between climate and socio-economic systems: a review toward integrating Earth–human systems

The Economic Cost of Covid Lockdowns: An Out-of-Equilibrium Analysis

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