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Disaster Risk, Inequality, and Fiscal Sustainability

Author

Listed:
  • Le , Anh H.

    (Goethe University Frankfurt)

  • Park , Donghyun

    (Asian Development Bank)

  • Beirne , John

    (Asian Development Bank)

  • Uddin, Gazi Salah

    (Linköping University)

Abstract
This paper analyzes the effects of climate change on budgetary sustainability and inequality. Using panel data, the findings suggest that rising climate-related disaster risks raise government debt and undermine fiscal sustainability, with low-income households bearing the brunt of the impact. According to a New Keynesian Dynamic Stochastic General Equilibrium model, disaster risk generates recessions and increases inequality, particularly among “hand-to-mouth” agents. The paper also shows a considerable increase in sovereign debt due to disaster risk, and it recommends targeted transfers while cautioning against the fiscal cost of progressive taxes.

Suggested Citation

  • Le , Anh H. & Park , Donghyun & Beirne , John & Uddin, Gazi Salah, 2024. "Disaster Risk, Inequality, and Fiscal Sustainability," ADB Economics Working Paper Series 750, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0750
    as

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    File URL: https://www.adb.org/publications/disaster-risk-inequality-fiscal-sustainability
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    More about this item

    Keywords

    climate change; disaster risk; physical risk; heterogeneous agent; fiscal policy;
    All these keywords.

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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