Adaptation to climate change and economic growth in developing countries

The global climate is changing, and will continue to do so even if greenhouse gas emissions are dramatically curbed. Economies are therefore faced with the challenge of adapting to climate change. This challenge is particularly important in developing countries, which, due to a combination of unfortunate geography and high sensitivity, are most vulnerable to climate change. From a macro-economic point of view, there remains much to learn about the characteristics of optimal adaptation. In particular, it is unclear whether the best way to adapt to climate change is simply to focus on traditional growth and development goals, or to divert significant investment into ‘climate-proofing’ productive capital. This paper conduct analytical and numerical modeling to gain new insights into this question. Analytical model shows that the task of apportioning investment between productive capital and adaptation to climate change is a subtle one.

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