Faraway, So Close: Coupled Climate and Economic Dynamics in an Agent-based Integrated Assessment Model

By Francesco Lamperti, Giovanni Dosi, Mauro Napoletano, Andrea Roventini, Alessandro Sapio. Ecological Economics, 2018

196 citations recorded by the source corpus.

In this work we develop an agent-based model that offers an alternative to standard, computable general equilibrium integrated assessment models (IAMs). The Dystopian Schumpeter meeting Keynes (DSK) model is composed of heterogeneous firms belonging to capital-good, consumption-good and energy sectors. Production and energy generation lead to greenhouse gas emissions, which affect temperature dynamics. Climate damages are modelled at the individual level as stochastic shocks hitting workers' labour productivity, energy efficiency, capital stock and inventories of firms. In that, aggregate damages emerge from the aggregation of losses suffered by heterogeneous, interacting and boundedly rational agents. The model is run focusing on a business-as-usual carbon-intensive scenario consistent with a Representative Concentration Pathway 8.5. We find that the DSK model is able to account for a wide ensemble of micro- and macro-empirical regularities concerning both economic and climate dynamics. Simulation experiments show a substantial lack of isomorphism between the effects of micro- and macro-level shocks, as it is typical in complex system models. In particular, different types of shocks have heterogeneous impact on output growth, unemployment rate, and the likelihood of economic crises, pointing to the importance of the different economic channel affected by the shock. Overall, we report much larger climate damages than those projected by standard IAMs under comparable scenarios, suggesting possible shifts in the growth dynamics, from a self-sustained pattern to stagnation and high volatility, and the need of urgent policy interventions.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/e3fd2a71d6efcf28ad2e8e4f7c8268c0c1448936

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Citations in the corpus

A review of agent‐based modeling of climate‐energy policy (2020, methodology): “Lamperti et al., 2018; 23.”
Three green financial policies to address climate risks (2021, methodology): “We first search the parameter space to identify a set of calibration candidates that allow matching as closely as possible the target empirical features reported in Table 1; then we retain the candidate that is closest to the parameter sets tested and employed in earlier versions of the model (Dosi ”
The public costs of climate-induced financial instability (2019, background): “Model is described in details in Lamperti et al (2018a) and in the Supplementary Information of the present study.”
More is different ... and complex! the case for agent-based macroeconomics (2019, methodology): “…employed, an important domain of analysis regards the sensitivity of the model to parameter changes, through different methods including Kriging meta-modeling (Salle and Yıldızoğlu, 2014; Bargigli et al., 2016; Dosi et al., 2017d,c, 2018c), and machine-learning surrogates (Lamperti et al., 2018c).”
Climate Change, Financial Stability and Monetary Policy (2018, unknown): “For a damage function that considers explicitly the heterogeneity of climate shocks across agents, see Lamperti et al. (2017).”
Complexity and the Economics of Climate Change: A Survey and a Look Forward (2017, unknown): “Finally, the fast pace at which ABMs have blossoming in the last years has lead to the development of a new generation of agent-based integrated-assessment models (Lamperti et al., 2017).”
A Financial Macro-Network Approach to Climate Policy Evaluation (2018, background): “However, recent analyses show that win-win options could arise from the introduction of either fiscal or monetary policies aimed to mitigate climate change and to support the low-carbon transition (Lamperti et al., 2016; Ponta et al., 2016; Monasterolo and Raberto, 2018).”