Paper #1709

Title:

Evaluating the economic cost of coastal flooding

Authors:

Klaus Desmet, Robert E. Kopp, Scott A. Kulp, David Krisztián Nagy, Michael Oppenheimer, Esteban Rossi-Hansberg and Benjamin H. Strauss

Date:

September 2019

Abstract:

Sea-level rise and ensuing permanent coastal inundation will cause spatial shifts in population and economic activity over the next 200 years. Using a highly spatially disaggregated, dynamic model of the world economy that accounts for the dynamics of migration, trade, and innovation, this paper estimates the consequences of probabilistic projections of local sea-level changes under different emissions scenarios. Under an intermediate greenhouse gas concentration trajectory, permanent flooding is projected to reduce global real GDP by an average of 0.19% in present value terms, with welfare declining by 0.24% as people move to places with less attractive amenities. By the year 2200 a projected 1.46% of world population will be displaced. Losses in many coastal localities are more than an order of magnitude larger, with some low-lying urban areas particularly hard hit. When ignoring the dynamic economic adaptation of investment and migration to flooding, the loss in real GDP in 2200 increases from 0.11% to 4.5%. This shows the importance of including dynamic adaptation in future loss models.

Keywords:

quantitative economic geography, economic growth and development, climate change

JEL codes:

Q54, R11, R12, R13

Area of Research:

Macroeconomics and International Economics

Published in:

American Economic Journal: Macroeconomics 13(2), 2021, 444-486

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