The Return to Adaptation in a Changing Climate
We quantify the economic return to adaptation in a changing climate. Our approach exploits the fact that extreme-weather arrivals are nonhomogeneous: we first estimate each country’s time-varying disaster arrival rate, then test whether per-disaster damage declines when risk is elevated—a key feature of risk-dependent adaptation. We apply this to tropical cyclones across 48 countries over 1980–2019. Indeed, cyclones do significantly less damage when the arrival rate has risen above its historical baseline. The finding survives placebo permutations, lagged-disaster controls, and two-way-fixed-effects critiques. Welfare gains reach several percent of GDP for the most exposed economies and scale sharply under climate projections.
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Copy CitationHarrison Hong, Serena Ng, and Jiangmin Xu, "The Return to Adaptation in a Changing Climate," NBER Working Paper 33824 (2025), https://doi.org/10.3386/w33824.Download Citation
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