DP13128 Evaluating the Economic Cost of Coastal Flooding

Author(s): Klaus Desmet, Robert Kopp, Scott A. Kulp, David Kriszti√°n Nagy, Michael Oppenheimer, Esteban Rossi-Hansberg, Benjamin H. Strauss
Publication Date: August 2018
Keyword(s): coastal flooding, Geography, mobility, sea-level rise, Space, spatial growth models, Trade
JEL(s): F18, F22, F43, Q51, Q54, Q56, R11
Programme Areas: International Trade and Regional Economics, Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13128

Sea-level rise and ensuing permanent coastal inundation will cause spatial shifts in population and economic activity over the next 200 years. Using a highly spatially disaggregated, dynamic model of the world economy that accounts for the dynamics of migration, trade, and innovation, this paper estimates the consequences of probabilistic projections of local sea-level changes under different emissions scenarios. Under an intermediate greenhouse gas concentration trajectory, permanent flooding is projected to reduce global real GDP by an average of 0.19% in present value terms, with welfare declining by 0.24% as people move to places with less attractive amenities. By the year 2200 a projected 1.46% of world population will be displaced. Losses in many coastal localities are more than an order of magnitude larger, with some low-lying urban areas particularly hard hit. When ignoring the dynamic economic adaptation of investment and migration to flooding, the loss in real GDP in 2200 increases from 0.11% to 4.5%. This shows the importance of including dynamic adaptation in future loss models.