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A General Equilibrium Investigation of the American Dust Bowl

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  • Yang, Dongkyu

Abstract

Economic adjustments through trade and migration can mitigate environmental shocks but may also propagate them to other parts of the economy. Using a dynamic spatial general equilibrium model, I quantify the transmission of environmental shocks by capitalizing on the 1930s American Dust Bowl. The counterfactual analysis shows that the Dust Bowl decreased aggregate U.S. welfare by 3.80% per capita by 1940. The local shock in agriculture more than proportionally transmitted to consumer services, while the tradable goods-producing sec-tor mitigated the shock. Such a disparity hindered structural change to services in the Dust Bowl region. Instead, economy-wide adjustments relied on the spatial reallocation of workers. Moreover, the Dust Bowl region exported price increases in agricultural goods, leading to a sizeable welfare loss in the non-Dust Bowl region despite the relative increases in real income.

Suggested Citation

  • Yang, Dongkyu, 2024. "A General Equilibrium Investigation of the American Dust Bowl," SocArXiv jxz2b_v1, Center for Open Science.
  • Handle: RePEc:osf:socarx:jxz2b_v1
    DOI: 10.31219/osf.io/jxz2b_v1
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    References listed on IDEAS

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    1. Fabian Eckert & Andrés Gvirtz & Jack Liang & Michael Peters, 2020. "A Method to Construct Geographical Crosswalks with an Application to US Counties since 1790," NBER Working Papers 26770, National Bureau of Economic Research, Inc.
    2. Rudik, Ivan & Lyn, Gary & Tan, Weiliang & Ortiz-Bobea, Ariel, 2022. "The Economic Effects of Climate Change in Dynamic Spatial Equilibrium," Conference papers 333486, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
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