Events

Mr. Jeffrey Sun
PhD Candidate in Economics
Princeton University

In the United States, the majority of the median household’s wealth is in the form of a single climate-
exposed asset: their home. I study how this shapes household heterogeneity in the welfare impacts
of climate change. In reality, house prices are location-specific, forward-looking, and determined in
equilibrium by households uncertain about the future. I build a dynamic spatial equilibrium model
of the U.S. with 1713 locations, incorporating heterogeneous and forward-looking households whose
housing wealth depends on prices which they endogenously determine in spatially-segmented housing
markets subject to climate news shocks and migration responses. I find the otherwise-intractable global
solution under climate uncertainty using a simple and general deep learning method which I am preparing
in a companion paper. I quantify the model using harmonized recent estimates of climate impacts on
local productivity, amenities, maintenance costs, and disaster risk. I discipline uncertainty using climate
projections and time series data on homeowners insurance premiums. In the calibrated model, a switch
from widespread climate denial to widespread climate acceptance leads to an effective transfer of housing
wealth across regions of $41bn immediately and $507bn over the following century. In contrast to models
without housing wealth, anticipatory migration in my model increases spatial inequality in the welfare
impacts of negative climate news shocks by amplifying housing price responses. Subsequent climate
uncertainty causes ongoing regressive wealth transfers as housing asset climate risk is largely passed on
to poorer households through higher rents.