| Description: |
This dissertation focuses on two aspects of environmental economics: (1) understanding the impacts of climate change on economic systems and individual decisions and (2) informing the design of environmental policies to foster adaptation to future climate risks. It aims to provide evidence of both academic and policy interests, combining diverse sources of data---censuses and surveys, satellite imagery, climate projections---with modeling tools from the empirical industrial organization literature. The first chapter, 𝘗𝘳𝘰𝘵𝘦𝘤𝘵 𝘰𝘳 𝘗𝘳𝘦𝘱𝘢𝘳𝘦? 𝘊𝘳𝘰𝘱 𝘐𝘯𝘴𝘶𝘳𝘢𝘯𝘤𝘦 𝘢𝘯𝘥 𝘈𝘥𝘢𝘱𝘵𝘢𝘵𝘪𝘰𝘯 𝘪𝘯 𝘢 𝘊𝘩𝘢𝘯𝘨𝘪𝘯𝘨 𝘊𝘭𝘪𝘮𝘢𝘵𝘦, explores one trade-off governments face when designing weather insurance policies. On the one hand, offering assistance to individuals and businesses to insure their assets and revenues against climate risk lowers the financial strains extreme weather events put on the economy. On the other hand, interventions in the insurance market may slow down the adoption of costly adaptation technologies and increase the climate vulnerability of the system in the future. I study this question in the U.S. Federal Crop Insurance Program context. This program regulates weather protection insurance and offers large premium subsidies to farmers. On average, farmers pay only 40% of the price of their insurance and subsidies add to between 5 and 10 billion dollars annually. I build and estimate a dynamic land use and crop insurance choice model under climate change to quantify the aggregate welfare impact of alternative subsidy schedules. I find that without climate change, the current insurance subsidy decreases welfare by 1.5 percent of the total output value. Moreover, by disincentivizing farmers' adaptation to climate change and increasing the agricultural system's exposure to weather shocks in the future, the status quo further decreases welfare by 1.3 percentage points. However, designing the subsidies to reflect the climate change dynamic and shifting risk patterns provides efficiency gains at no additional cost to the government, fosters ... |