Inequality, Human Well-Being and Development

Hosted by Research Department 2 on Climate Resilience.
 

Motivation

Managing the global commons within planetary boundaries requires new knowledge on the impact of climate change and climate policy on individual well-being. Inequality aggravates climate damages and constrains climate action, especially in low- and middle income countries (LMIC). The impacts of shocks and policies on inequality need to be understood, while policies need to address multiple fiscal objectives.

This FutureLab analyses the role of inequality, human well-being and development for understanding the impacts of and responses to climate change from an economic perspective. On the one hand, econometric methods are applied to empirically assess the impacts of extreme weather events and specific policies on households in LMIC. On the other hand, economic theory and philosophy of public policy are used to study how policies  can successfully address the implications of emissions reductions on inequality and well-being. An additional focus will be on outcomes that are key to achieve resilient human development, such as health and nutrition.

The FutureLab, established in August 2020, is hosted by PIK’s Research Department 2 on Climate Resilience, while it closely interacts with the Mercator Research Institute on Global Commons and Climate Change (MCC) on the economics of inequality.


Inequality

The impacts of climate change on within-country inequality are not well understood to date. Further, in an economic context of rising wealth inequality within nation states, global solutions to climate change risk rejection by a citizenry distrustful of government. Our research aims at quantifying the climate impacts on inequality across households, using a micro-economic approach. Moreover, it aims to provide an account of which stricter mitigation policies are feasible under persisting inequalities.

Main research questions

• What are the consequences of extreme weather events on inequality within countries?
• Which inequalities impede stringent mitigation policies and how can they be overcome?


Human well-being

The impacts of climate change affect human well-being in diverse ways. Yet, so far, the focus has largely been on economic outcomes. To grasp the full impacts of climate change on individual well-being, our research will consider a wide range of economic and non-economic indicators, including household income, assets, life satisfaction, health, nutrition, and fertility.

Further, different normative points of view on individual well-being influence environmental policy recommendations. To date, mitigation policy instruments have hardly been examined in a way that appeals to citizens’ diverse values. It is not well understood which factors in the design of carbon prices, congestion charges, meat taxes, and direct regulation is appealing to citizens’ diverse identities and values. Further, health co-benefits of mitigation policies are not sufficiently framed as ‘behavioural-environmental second-best problems’, that is, the joint occurrence of an environmental externality and a behavioural failure.

Main research questions

  • What are the climate change impacts on measures of human well-being?
  • How can public support for environmental policy be determined by accounting for citizens’ values and identities?

Development

In many low- and middle-income countries, a high share of the population depends on natural resources for their living, which makes their income vulnerable to weather conditions. There is a need for adaptation instruments to protect households from losses caused by climate change. Our research aims at providing methodologically rigorous impact evaluations that assess which adaptation instruments are effective and which are not.

Further, political feasibility and public support for carbon pricing in LMIC has not been analysed systematically. However, it is likely that governance challenges and low public support are a greater obstacle to price interventions than in high-income countries. In a majority of LMICs, a carbon price is found to be progressive and has high benefits in reducing tax evasion. These economic benefits, however, do not seem sufficient to overcome lack of public trust and high corruption as obstacles to mitigation policy.

Main research questions

  • How effective are different adaptation instruments in protecting households from losses caused by extreme weather events, and what are barriers to implementing adaptation?
  • How do proven concepts for designing environmental pricing in highly functioning governments translate to less developed economies?

Team

Kati Krähnert (FutureLab co-lead)

Linus Mattauch (FutureLab co-lead)

Lemlem Habtemariam (Postdoc)

Svenja Fluhrer (PhD student)

Franziska Funke (PhD student)

Lukas Mogge (PhD student)

Julian Röckert (PhD student)

Hazem Krichene (associated member, RD3)

Christian Otto (associated member, RD3)

Michael Pahle (associated member, RD3)

Jan Steckel (associated member, MCC Berlin)

We welcome applications by MA students and PhD students in economics for co-supervision of their thesis in fields related to our research. Please contact Kati Krähnert () to discuss possible topics.


Associated Project

German Federal Foreign Office
title          Early Action Cash Transfers: Randomized impact evaluation of a new instrument in humanitarian aid (CashEval)
grant        200 000 € total, budget FL: 53 000 €
duration   02/2021 – 04/2023
lead          Kati Krähnert

Deutsche Bundesstiftung Umwelt
title          Living with climate risk
grant        PhD scholarship
duration   07/2020 – 06/2023
lead          Lukas Mogge

Cusanuswerk
title          Long-Term Household-Consequences of Extreme Weather Events in Developing Countries

grant        PhD scholarship
duration   03/2020 – 02/2023
lead          Julian Röckert

BMBF
title          Dealing with climate risks (UmRisk)
grant        141 000 €
duration   10/2019 – 10/2022
lead          Kati Krähnert

BMBF
title          Assisting households to adapt to climate change (ADAPT)
grant        811 000 €
duration   05/2019 – 10/2022
lead          Kati Krähnert

The FutureLab co-hosts the Development Economics Network Berlin (DENeB)


Work in Progress

Mogge, L., Kraehnert, K. (2020). The effect of risk perception on the demand for index insurance in Mongolia (under review).

Fluhrer, S., Kraehnert, K. (2021). Sitting in the same boat: Subjective well-being and social comparison after an extreme weather event (under review).

Lehmann-Uschner, K., Kraehnert, K. (2018). When shocks become persistent: Household-level asset growth in the aftermath of an extreme weather event. DIW Discussion Paper 1759.

Murken, L., Mager, G., Laudien, R., Kraehnert, K. & Gornott, C. (2021). The influence of land conflicts on farmers' perceived tenure security and title acquisition: Evidence from Tanzania (submitted).

Mattauch, L., Klenert, D., Stiglitz, J.E., Edenhofer, O. (2018) Overcoming wealth inequality by capital taxes that finance public investment. NBER Working Paper 25126

Mattauch, L., Hepburn, C., Stern, N. (2018). Pigou pushes preferences: decarbonisation options when preferences are endogenous. CESifo Working Paper 7404.

Sommer, S., Mattauch, L., Pahle, M. (2020). Supporting carbon taxes and the role of fairness. (INET Working paper 2020-23)

Sulikova, S., van den Bijgaart, I., Klenert, D., Mattauch, L. (2020). Optimal fuel taxation with suboptimal health choices. (INET Working Paper 2020-22)

Zhao, J., Mattauch, L. (2020). When standards have better distributional consequences than carbon taxes. (INET Working Paper 2020-25)

Funke, F., Mattauch, L., van den Bijgaart, I., Godfray, C., Hepburn, C. , Klenert, D., Springmann, M. & Treich, N. (2021). Is Meat Too Cheap? Towards Optimal Meat Taxation. (INET Working Paper 2021-08)



Publications

Roeckert, J. & Kraehnert, K. (2021). Extreme weather events and internal migration: Evidence from Mongolia. Economics of Disasters and Climate Change, forthcoming.

Kraehnert, K., Osberghaus, D., Hott, C., Habtemariam, L., Wätzold, F., Hecker, L. P. & Fluhrer, S. (2021) Insurance against extreme weather events: An overview. Review of Economics 72(2), 71-95.

Habtemariam L.T., Gornott C., Hoffmann H. and Sieber S. (2021). Farm production diversity and household dietary diversity: panel data evidence from rural households in Tanzania. Frontiers in Sustainable Food Systems 5, 612341

Habtemariam, LT., Will, M. and Müller, B. (2021). Agricultural insurance through the lens of rural household dietary diversity. Global Food Security, 28, 100485.

At the time of establishment of this FutureLab in August 2020, we built on the following works from our previous research:

Teickner, H., Knoth, C., Bartoschek, T., Kraehnert, K. et al. (2020). Patterns in Mongolian nomadic household movement derived from GPS trajectories. Applied Geography, 122, 102270

Klenert, D., Funke, F., Mattauch, L., O’Callaghan, B. (2020). Five lessons from COVID-19 for advancing climate change mitigation. Environmental and Resource Economics, 76, 751–778

Mattauch, L., Matthews, H.D., Millar, R., Rezai, A., Solomon, S., Venmans, F. (2020). Steering the climate system: comment. American Economic Review 110(4): 1238–1241.

Klenert, D., Mattauch, L., Combet, E., Edenhofer, O., Hepburn, C., Rafaty, R. and Stern, N. (2018) Making carbon pricing work for citizens. Nature Climate Change 8: 669-677.

Klenert, D., G. Schwerhoff, O. Edenhofer, L. Mattauch (2018). Carbon Taxation, Inequality and Engel's Law -- The Double Dividend of Redistribution. Environmental and Resource Economics 71(3):605-624

Siegmeier, J., Mattauch, L., O. Edenhofer (2018). Capital beats coal: how collecting the climate rent increases aggregate investment. Journal of Environmental Economics and Management 88:366-378.

Bertram-Huemmer, V. and Kraehnert, K. (2018). Does index insurance help households recover from disaster? Evidence from IBLI Mongolia. American Journal of Agricultural Economics, 100(1), 145-171.

Groppo, V. and Kraehnert, K. (2017). The impact of extreme weather events on education. Journal of Population Economics, 30(2), 433-472.

Lehmann-Uschner, K. and Kraehnert, K. (2017). Food intake and the role of food self-provisioning. Journal of Development Studies, 53(8), 1303-1322.

Groppo, V. and Kraehnert, K. (2016): Extreme weather events and child health: Evidence from Mongolia. World Development, 86, 59-78


photo credits: pixabay.com