Climate Change Adaptation Strategies

Below the fold, I sketch the rational expectations view of how climate change adaptation unfolds in an economy populated with self interested, forward looking decision makers.  If government invests in local public goods such as Sea Walls then firms and households will re-optimize accordingly.   If you are interested in the “multiple equilibria”  introduced by government choosing whether to build Sea Walls (and it is more likely to if it believes that more people will live in the at risk area) as a function of how many people live in the affected area (and more will if they expect that Sea Walls will be built) then read this paper.

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