Inequality, Human Well-Being and Development


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.


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?


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?

Associated Members

Associated Projects

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
Partner: People in Need
Lead: Kati Krähnert

Deutsche Bundesstiftung Umwelt
Title: Living with climate risk
Grant: PhD scholarship
Duration: 07/2020 – 06/2023
Lead: Lukas Mogge

Title: Long-term household consequences of extreme weather events in developing countries
Grant: PhD scholarship
Duration: 03/2020 – 02/2023
Lead: Julian Röckert

Title: Dealing with climate risks (UmRisk)
Grant: 141 000 €
Duration: 10/2019 – 10/2022
Lead: Kati Krähnert

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)