2026/01/24 by Stephie Fried · 1 voice
Economics, Econometrics and Finance · Decision Sciences · Agricultural and Biological Sciences · #Climate Change Policy and Economics #demographic modeling and climate adaptation #Climate change impacts on agriculture
paper · doi:10.1093/ej/ueaf135
openalex created_date 2025/12/10 · openalex publication_date 2026/01/24 · openalex updated_date 2026/07/29
Abstract This paper develops a macro heterogeneous-agent model to quantify the distributional impacts of higher temperatures resulting from climate change in the United States. Households adapt to temperature through two channels: an intensive margin—adjusting energy use for heating and cooling—and an extensive margin—deciding whether to purchase temperature-control equipment such as a heater, air conditioner or heat pump. I estimate the production functions for household heating and cooling from a unique product-level data set and calibrate the remaining parameters to match variation in energy expenditures and budget shares with income levels. I find that the welfare effects of climate change vary substantially with income and region. In colder areas, climate change increases inequality in lifetime welfare. While all households experience greater cooling needs, the costs are particularly acute for lower-income households, who purchase air conditioners that they did not previously need. In warmer areas, the opposite pattern reduces welfare inequality.