AEA Papers and Proceedings
ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)
Climate Change and Long-Run Factor Shares
AEA Papers and Proceedings
(pp. 510–516)
Abstract
What is the long-run effect of climate change on how income is distributed between capital and labor? To answer this question, we develop an equilibrium growth model with labor- and capital-augmenting productivities that are affected by changes in temperature. We show that how temperature affects the long-run division of income only depends on the elasticity of substitution between labor and capital and how temperature affects capital-augmenting productivity. Labor-augmenting productivity and the elasticity of labor supply play no role in temperature's long-run effects on factor shares.Citation
Liu, Tianzi, Ivan Rudik, and Zebang Xu. 2026. "Climate Change and Long-Run Factor Shares." AEA Papers and Proceedings 116: 510–516. DOI: 10.1257/pandp.20261025Additional Materials
JEL Classification
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- E26 Informal Economy; Underground Economy
- O44 Environment and Growth
- Q54 Climate; Natural Disasters and Their Management; Global Warming