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The Impact of Climate Change Skepticism on Adaptation in a Market Economy

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  • Matthew E. Kahn
  • Daxuan Zhao

Abstract

Climate change will increase the risk of temperature extremes. Induced innovation could offset some of this threat. This paper explores the demand and supply for climate adaptation innovation in a market economy. Climate change induces this innovation because the rising temperatures increase demand for self protection products and for profit firms respond to these incentives. We then augment the model to introduce climate skeptics. Such skeptics reject the claim that the world is warming and thus do not increasingly demand adaptation products. We study how the economy's rate of adaptation innovation, cross city migration, real estate pricing and the welfare of agents with rational expectations are all affected by the presence of such skeptics.

Suggested Citation

  • Matthew E. Kahn & Daxuan Zhao, 2017. "The Impact of Climate Change Skepticism on Adaptation in a Market Economy," NBER Working Papers 23155, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:23155
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The 2018 Nobel Prize in Economics
      by Matthew Kahn in Environmental and Urban Economics on 2018-10-21 02:17:00
    2. Low Carbon Suburban Living in 2021 in our "Post-COVID19" World
      by Matthew E. Kahn in Environmental and Urban Economics on 2020-04-05 23:04:00
    3. Climate Change Adaptation for Urban Indian Slum Dwellers: A New Economics Research Agenda
      by Matthew E. Kahn in Environmental and Urban Economics on 2020-11-22 14:40:00
    4. Climate Change Adaptation in a Spatial Economy
      by Matthew E. Kahn in Environmental and Urban Economics on 2020-11-26 16:10:00
    5. The Microeconomics of the Rise of Green Buildings and Climate Change Adaptation: A California Example
      by Matthew E. Kahn in Environmental and Urban Economics on 2020-12-23 16:05:00
    6. How Does Applied Microeconomic Research Accelerate Climate Change Adaptation?
      by Matthew E. Kahn in Environmental and Urban Economics on 2021-05-13 14:39:00
    7. Incorporating Local Public Health Dynamics into The Rosen/Roback Spatial Equilibrium Model
      by Matthew E. Kahn in Environmental and Urban Economics on 2021-10-24 12:11:00
    8. The More Climate Skeptics There Are, the Fewer Climate Entrepreneurs
      by Matthew E. Kahn in HBR Blog Network on 2017-03-16 19:13:53
    9. How Do Environmental Economists Know that the Social Cost of Carbon is $42 a Ton?
      by Matthew Kahn in Environmental and Urban Economics on 2017-02-19 23:43:00
    10. How Do Skeptics Affect Our Collective Ability to Adapt to Climate Change?
      by Matthew Kahn in Environmental and Urban Economics on 2017-02-16 21:12:00
    11. My Recent Writing on Climate Economics
      by Matthew Kahn in Environmental and Urban Economics on 2017-02-17 06:19:00
    12. My New HBR Piece on Climate Skeptics and Induced Innovation
      by Matthew Kahn in Environmental and Urban Economics on 2017-03-16 22:17:00
    13. An Academic Named "Kahn" (not me) Opines About Climate Change Adaptation in the NY Times
      by Matthew Kahn in Environmental and Urban Economics on 2017-04-23 19:36:00
    14. My Upcoming David S. Saurman Provocative Lecture at SJSU
      by Matthew Kahn in Environmental and Urban Economics on 2017-04-07 19:00:00
    15. Should Hollywood Make More Movies About Climate Change?
      by Matthew Kahn in Environmental and Urban Economics on 2017-04-29 09:01:00
    16. A "Julian Simon" Style Test of the Climate Change Adaptation Hypothesis
      by Matthew Kahn in Environmental and Urban Economics on 2017-05-26 21:16:00
    17. An "Old School" University of Chicago Price Theory Problem on the Economics of Climate Change Adaptation
      by Matthew Kahn in Environmental and Urban Economics on 2017-07-04 19:19:00
    18. Sane Discussion of Disaster Adaptation in the NY Times
      by Matthew Kahn in Environmental and Urban Economics on 2017-09-30 22:55:00
    19. The Amazon HQ City Decision and Lessons for Urban Adaptation to Climate Change
      by Matthew Kahn in Environmental and Urban Economics on 2017-09-08 19:48:00
    20. Austrian Empirical Economics?
      by Matthew Kahn in Environmental and Urban Economics on 2017-11-23 23:19:00
    21. Optimism on Climate Change Adaptation: Lessons from Marathon Races
      by Matthew Kahn in Environmental and Urban Economics on 2017-11-04 21:33:00
    22. Week in review – science edition
      by ? in Climate Science on 2021-06-06 22:07:30
    23. Week in review – science edition
      by ? in Iowa Climate on 2021-06-06 18:36:51
    24. Week in review – science edition
      by ? in Climate Etc. on 2021-06-06 18:20:48

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    Cited by:

    1. Peter Jacobsen & Louis Rouanet, 2022. "Economists versus engineers: Two approaches to environmental problems," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 35(3), pages 359-381, September.
    2. Mohaddes, Kamiar & Williams, Rhys J., 2020. "The adaptive investment effect: Evidence from Chinese provinces," Economics Letters, Elsevier, vol. 193(C).
    3. Laura A. Bakkensen & Lint Barrage, 2017. "Flood Risk Belief Heterogeneity and Coastal Home Price Dynamics: Going Under Water?," NBER Working Papers 23854, National Bureau of Economic Research, Inc.
    4. Barrage, Lint & Furst, Jacob, 2019. "Housing investment, sea level rise, and climate change beliefs," Economics Letters, Elsevier, vol. 177(C), pages 105-108.

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    More about this item

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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