The Impact of Climate Change on Human Capital Accumulation: A Macroeconomic Perspective

Gregory Casey, Stephie Fried, and Matthew Gibson

This project has been retired

Small Research Grant

Climate change poses a considerable economic risk to developing countries. Human capital plays a central role in economic growth. However, leading macroeconomic models of climate change abstract from human capital, potentially underestimating the long-run consequences of climate change. This project studies the impact of climate on human capital accumulation, structural change and economic growth in developing countries, focusing on two mechanisms. The first mechanism is that extreme heat hinders the ability of students to learn, decreasing the effectiveness of schooling and reducing the incentive to attend school. The second mechanism is that climate change reduces the relative productivity of agriculture, drawing working into this sector and decreasing their incentive to attend school.

The research team study the quantitative impact of these forces in a macroeconomic model of structural change and economic growth. They parameterise the model with results from the applied micro literature and use the structure of the model to quantify the impacts of future changes in climate, focusing on aggregate economic outcomes in Nigeria. The team also use the structure of the model to examine how government policy interventions, like the provision of air conditioners in schools and decreasing barriers to working in non-agricultural sectors, will moderate the future impacts of climate.

These counterfactual simulations will help policymakers in developing countries prioritise actions meant to aid in adaptation to climate change. In addition, the quantification of climate impacts that include human capital will improve existing estimates of the welfare consequences of climate change. This, in turn, will help policymakers in developed countries understand the full social cost of carbon emissions and develop appropriate climate change mitigation policies

Research Team

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