Browsing by Author "Ronda Lazen, Sebastián Andrés"

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    Climate change, agriculture and optimal transport networks
    (2021) Ronda Lazen, Sebastián Andrés; Silva M., Hugo; Zurita Lillo, Felipe; Pontificia Universidad Católica de Chile. Instituto de Economía
    One of the inevitable consequences of climate change is decreased productivity in crops. Reallocation of crops towards more productive lands would be an optimal response to this. As that would affect the distribution of labor, consumption, and prices, impacting people, especially the poor. To understand the consequence of a decrease in agricultural productivity on the economy, we develop a spatial trade model to show how the distribution of production and investment in trade networks (through the shape of trade costs) affect the welfare of agents. Then, we perform simulations to understand how a correct investment in infrastructure could offset this decrease in welfare caused by climate change. Finally, we carry out additional simulations to find the optimal distribution of additional investments on transport networks. We find that when a central planner can choose the optimal investment in networks for the climate change scenarios, there is a relocation of workers towards the agricultural industry, and people who live far away from the industrial production face lower prices and they increase their per capita consumption. Nevertheless, we find that increases in trade networks investment are not enough to offset the decrease in per capita utility due to climate change. Investments in trade networks facilitate the movement of workers and industries, however, other policies are necessary to address the negative effects of decreased agricultural productivity due to climate change.