Income inequality and climate change
Climate anomalies, such as floods and droughts, as well as gradual temperature changes have been shown to adversely affect economies and societies. Although studies find that climate change might increase global inequality by widening disparities across countries, its effects on within-country income distribution have been little investigated, as has the role of rainfall anomalies. We show that extreme levels of precipitation exacerbate within-country income inequality. The strength and direction of the effect depends on the agricultural intensity of an economy. In high-agricultural-intensity countries, climate anomalies that negatively impact the agricultural sector lower incomes at the bottom end of the distribution and generate greater income inequality.

Our results indicate that a 1.5-SD increase in precipitation from average values has a 35-times-stronger impact on the bottom income shares for countries with high employment in agriculture compared to countries with low employment in the agricultural sector. Projections with modeled future precipitation and temperature reveal highly heterogeneous patterns on a global scale, with income inequality worsening in high-agricultural-intensity economies, particularly in Africa. Our findings suggest that rainfall anomalies and the degree of dependence on agriculture are crucial factors in assessing the negative impacts of climate change on the bottom of the income distribution.
Date: 8 March 2023, 14:30 (Wednesday, 8th week, Hilary 2023)
Venue: Manor Road Building, Manor Road OX1 3UQ
Venue Details: Seminar Room G and online via Zoom
Speaker: Elisa Palagi (Sant’Anna School of Advanced Studies)
Organising department: Institute for New Economic Thinking
Organiser: Dorothy Nicholas (INET Oxford)
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Host: Prof. Doyne Farmer
Part of: INET Complexity Economics Seminars
Booking required?: Required
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Audience: Public
Editors: Susan Mousley, Dorothy Nicholas