Climate Change, Migration, and Regional Economic Impacts in the United States

The Science

Recent studies predict that climate change will lead to a redistribution of population across the United States, as people choose to locate in regions less susceptible to extreme climate. However, these studies ignore the fact that migration will be dampened by changes in wage rates and housing prices as a result of migration. In this study, we apply a novel approach of linking a residential sorting model to an interregional computable general equilibrium model (CGE) of the United States to capture wage and housing price feedbacks to assess the economic impacts of climate-change-induced migration.

The Impact

An innovation of this research is the coupling of a residential sorting model and a CGE model to endogenize regional labor wages and housing prices and capture interactions across industrial sectors. Our results suggest that ignoring labor and housing market feedbacks, especially wage effects, will overstate the economic impacts from climate-change-induced migration. Future research should consider examining integrated impacts by allowing for multiple impacts and their interactions.

Summary

This paper assesses the regional economic impacts of climate-change-induced migration by coupling an interregional CGE model of the United States to a residential sorting model to endogenize labor wages and housing prices, and assess the regional economic impacts from interregional migration in response to changes in climate extremes. We find that endogenizing wages significantly dampens migration patterns. However, there are significant positive impacts on gross regional product and consumption in the Northeast, West, and California at the expense of the South and Midwest.

In addition, wage effects are found to dominate housing price and climate effects, which results in larger welfare changes.

Principal Investigator(s)

John Weyant
Stanford University
[email protected]

Funding

This work was supported by the U.S. Department of Energy, Office of Science, Biological and Environmental Research Program, Multisector Dynamics Research activity, Grant no. DE-SC0005171.

References

Fan, Q., K. Fisher-Vanden, and H.A. Klaiber. “Climate Change, Migration, and Regional Economic Impacts in the United States.” Journal of the Association of Environmental and Resource Economists 5(3): 643-671 (2018). DOI:10.1086/697168