Environment

Hiroyasu Inoue, Yasuyuki Todo, 25 April 2017

Natural disasters have enormous economic consequences, with the 2011 Great East Japan Earthquake providing a particularly stark recent example. This column uses supply chain data for more than one million Japanese firms to explore how negative shocks from natural disasters propagate through firm networks. Shocks are found to propagate very quickly, due in large part to certain ‘hub’ firms that have a high number of supply chain partners. Production substitution is the key to slowing the propagation.

Timothy Hatton, 03 April 2017

There is growing concern about the long-term health effects of atmospheric pollution. Conditions were much worse a century ago in Western countries, when coal-fired industrialisation reached its zenith, than they are now in countries where pollution presents the greatest challenges today. This column highlights the effect of polluted air on adult heights using a sample of British army soldiers in WWI. Pollution accounts for a difference of almost an inch between the average adult heights in least and most polluted localities.

Tim Besley, Avinash Dixit, 31 March 2017

Many scientists agree that the probability of a rare environmental disaster increases as the stock of greenhouse gases accumulate in the atmosphere. This column asks how much consumption current generations should be willing to sacrifice to reduce the risk of such a future catastrophe. If there were a way of immediately eliminating the risk of all future catastrophes, society should be willing to sacrifice 16% of its consumption in perpetuity to achieve this. A sacrifice of 5.8% of annual consumption could bring about a 30% reduction in emissions, in line with the reductions contemplated in agreements such as the Kyoto Protocol.

Gregory Casey, Oded Galor, 23 March 2017

Most policies that target climate change – such as carbon taxes and cap-and-trade programmes – have long-term benefits but short-term economic costs. This column argues that population policies may not be subject to this trade-off. In particular, policies that reduce population growth can have a direct positive effect on income per capita as well as lowering growth of carbon emissions. Such policies could play an important role in the portfolio of actions aimed at mitigating climate change.

Raymond Owens, Esteban Rossi-Hansberg, Pierre-Daniel Sarte, 15 February 2017

The decline of manufacturing employment in industrialised countries has hit some cities hard. This column looks at perhaps the best-known case – Detroit – where residents have deserted the neighbourhoods closest to the central business district in favour of the suburbs, despite the longer commute. Redeveloping these areas requires coordination between multiple developers, residents, and the city governments that facilitate permits and public services. The authors propose the introduction of ‘development guarantees’ to ease the coordination problems.

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