Seminar with Stephie Fried

Abstract

We study the impact of climate change on the US economy, focus­ing on the relative productivity of the investment and consump­tion sectors. A long macroeconomic literature demonstrates that improvements in investment-specific productivity are a major driver of economic growth in the US and other developed econo­mies. The investment sector is also highly vulnerable to climate change, in part due to the construction sub-sector. We develop a multi-sector model of structural change to study the effects of cli­mate change on investment-productivity and the associated wel­fare implications. We find that accounting for investment-specific climate damages substantially increases the welfare cost of climate change.