Note to self about climate change impacts and income inequality

Brad Delong's finger exercise could be tweaked to examine the effects of climate-change-induced reduction in agricultural productivity.

For the representative individual in the U.S. or any developed nation, the decline in agricultural productivity would be a very small deal since agricultural commodities are a very tiny share of aggregate consumption.

For the representative individual in a countries where people live on $2 a day or less and spend most of their income on agricultural commodities, it would be a very big deal.

So we need to tweak Delong's finger exercise so there are two kinds of individuals with different expenditure shares on commodities and one price. The expenditure share would be a couple orders of magnitude larger for the poor individual and demand would be more elastic, due to a larger income effect. The overall wealth impact would surely be huge for the poor individual and tiny for the rich individual.


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