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NATIONAL BUREAU OF ECONOMIC RESEARCH
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The Impact of Climate Change Skepticism on Adaptation in a Market Economy

Matthew E. Kahn, Daxuan Zhao

NBER Working Paper No. 23155
Issued in February 2017
NBER Program(s):Environment and Energy Economics

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.

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Document Object Identifier (DOI): 10.3386/w23155

Published: Matthew E. Kahn & Daxuan Zhao, 2018. "The impact of climate change skepticism on adaptation in a market economy," Research in Economics, vol 72(2), pages 251-262. citation courtesy of

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