Global economic impact of weather variability on the rich and the poor

Abstract

AbstractTemperature and precipitation variability and extremes impact production globally. These production disruptions will change with future warming, impacting consumers locally as well as remotely through supply chains. Due to a potentially nonlinear economic response, trade impacts are difficult to quantify; empirical assessments rather focus on the direct inequality impacts of weather extremes. Here, simulating global economic interactions of profit-maximizing firms and utility-optimizing consumers, we assess risks to consumption resulting from weather-induced production disruptions along supply chains. Across countries, risks are highest for middle-income countries due to unfavourable trade dependence and seasonal climate exposure. We also find that risks increase in most countries under future climate change. Global warming increases consumer risks locally and through supply chains. However, high-income consumers face the greatest risk increase. Overall, risks are heterogeneous regarding income within and between countries, such that targeted local and global resilience building may reduce them.