Simulating the economic impacts of climate change in the Mid-Atlantic Region

Abstract

ABSTRACT: This paper provides an overview of the Mid-Atlantic Region (MAR) economy and of mod-els that can be used to analyze how climate change will affect it. A regional input-output (I-O) table,downscaled from its national counterpart, provides insight into the extent of the MAR’s internal inter-dependence, as well as its dependence on trade with the rest of the US and the rest of the world. Thetable indicates that climate-sensitive sectors play a relatively small direct role in the MAR, but multi-plier and other types of general equilibrium effects could result in some small, but not insignificant,impacts on other sectors and other regions. An application of the I-O model to climate variabilityimpacts on forest-related sectors illustrates this point. Although I-O analysis is a useful tool for settingthe stage for an impact analysis, limitations of the methodology are identified. A general equilibriumapproach is presented as an alternative that captures the best features of I-O, yet is able to incorporatenon-linearities, input substitution, behavioral considerations, and the workings of prices and markets.KEY WORDS: Climate change · Mid-Atlantic Region economy · Economic impacts · Economic down-scaling · Input-output analysis · Computable general equilibrium analysis