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Climate-resilient economic development in Vietnam: Insights from a dynamic general equilibrium analysis (DGE-CRED). A technical documentation

Author

Listed:
  • Drygalla, Andrej
  • Heinisch, Katja
  • Schult, Christoph

Abstract

In a multi-sector and multi-region framework, this paper employs a dynamic general equilibrium model to analyze climate-resilient economic development (DGE-CRED) in Vietnam. We calibrate sector and region-specific damage functions and quantify climate variable impacts on productivity and capital formation for various shared socioeconomic pathways (SSPs 119, 245, and 585). Our results based on simulations and cost-benefit analyses reveal a projected 5 percent reduction in annual GDP by 2050 in the SSP 245 scenario. Adaptation measures for the dyke system are crucial to mitigate the consumption gap, but they alone cannot sufficiently address it. Climate-induced damages to agriculture and labor productivity are the primary drivers of consumption reductions, underscoring the need for focused adaptation measures in the agricultural sector and strategies to reduce labor intensity as vital policy considerations for Vietnam's response to climate change.

Suggested Citation

  • Drygalla, Andrej & Heinisch, Katja & Schult, Christoph, 2024. "Climate-resilient economic development in Vietnam: Insights from a dynamic general equilibrium analysis (DGE-CRED). A technical documentation," IWH Technical Reports 1/2024, Halle Institute for Economic Research (IWH).
    • Handle: RePEc:zbw:iwhtrp:306350
    as

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    File URL: https://www.econstor.eu/bitstream/10419/306350/1/1907950370.pdf
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    References listed on IDEAS

    as
    1. Schmitt-Grohe, Stephanie & Uribe, Martin, 2003. "Closing small open economy models," Journal of International Economics, Elsevier, vol. 61(1), pages 163-185, October.
    2. Phuong V. Nguyen, 2020. "The Vietnamese business cycle in an estimated small open economy New Keynesian DSGE model," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 48(5), pages 1035-1063, October.
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    4. Chi-Chung Chen & Bruce McCarl & Ching-Cheng Chang, 2012. "Climate change, sea level rise and rice: global market implications," Climatic Change, Springer, vol. 110(3), pages 543-560, February.
    5. Correia, Isabel & Neves, Joao C. & Rebelo, Sergio, 1995. "Business cycles in a small open economy," European Economic Review, Elsevier, vol. 39(6), pages 1089-1113, June.
    6. Channing Arndt & Finn Tarp & James Thurlow, 2015. "The Economic Costs of Climate Change: A Multi-Sector Impact Assessment for Vietnam," Sustainability, MDPI, vol. 7(4), pages 1-15, April.
    7. Nordhaus, William D, 1993. "Optimal Greenhouse-Gas Reductions and Tax Policy in the "Dice" Model," American Economic Review, American Economic Association, vol. 83(2), pages 313-317, May.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    adaptation; climate change; cost-benefit analysis; dynamic general equilibrium models;
    All these keywords.

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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