Climate Change, Trade and Inequalities in the Economic Growth Between Regions

Climate Change and Inequalities in the Economic Growth Between Regions: The Role of Trade Patterns Adjustments and Trade Regulations in Explaining the Developed-Developing Divide

Climate change is likely to have an increasing influence on the economic growth of many regions of the world. Agriculture in low latitude regions–often developing countries–, already suffering from poverty and food insecurity, could be affected. High latitude regions–often developed countries–, characterised by temperate climates, could observe positive effects on agriculture with warmer weather. Overall, climate change is likely to worsen the developed-developing divide. Uneven impacts of climate change across regions and consequent changes in food availability and access are likely to affect international trade patterns and trade routes.

By allowing the reallocation of food from surplus to deficit regions, agricultural trade has the potential to lower inequalities between regions with different levels of economic growth, helping countries adapt to climate change

In her AXA Fellowship, Dr. Emilia Lamonaca seeks to evaluate how trade and regulations allow regions with different levels of economic growth to adapt to climate change. Specifically, she wants to understand how climate change, by altering the comparative advantage of regions, affect their export capacity; how regions with different levels of economic growth adapt to climate change by reshaping trade patterns; how trade and regulations contribute to the allocation of co-benefits and side-effects of climate change mitigation policies across regions with different economic levels.

In order to do so, Dr. Lamonaca will develop a structural Ricardian approach. Such an approach will allow to investigate the extent to which changes in climate alter comparative advantage that, according to the Ricardian trade theory, is the relative ability of a country to produce a certain product (and export the excess of production) as compared to its trade partners. The impacts of climate change are estimated on outcomes assumed to be adaptations to climate change (i.e. evolution of trade patterns).

Using historical region-specific monthly average temperature and precipitation data, Dr. Lamonaca will use long-run climate differences between regions to explain changes in comparative advantages. Because international trade links regions, contributing to the transmission of geographically limited climatic impacts to a global level, she will use international trade data in order to examine the effects of climate change on economic growth. International trade data will also allow her to identify what sectors in the economic activity are affected by climatic changes.

By providing an in-depth analysis of the relationships between international trade and climate change, Dr. Lamonaca will contribute to the efforts promoting sustainable development and combating climate change, while also using them as a guide. The project would also provide evidence on international trade as an adaptation strategy to climate change in agriculture at global, regional and national levels.

February 2022