Economic Growth, Income Distribution, and Climate Change

Armon Rezai, Lance Taylor, Duncan K. Foley

Publication: Working/Discussion PaperWU Working Paper

Abstract

We present a model based on Keynesian aggregate demand and labor productivity growth to study how climate damage affects the long-run evolution of the economy. Climate change induced by greenhouse gas lowers profitability, reducing investment and cutting output in the short and long runs. Short-run employment falls due to deficient demand. In the long run productivity growth is slower, lowering potential income levels. Climate policy can increase incomes and employment in the short and long runs while a continuation of business-as-usual leads to a dystopian income distribution with affluence for few and high levels of unemployment for the rest.
Original languageEnglish
Place of PublicationVienna
PublisherWU Vienna University of Economics and Business
Publication statusPublished - 2017

Publication series

NameEcological Economic Papers
No.17

WU Working Paper Series

  • Ecological Economic Papers

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