Conference Agenda

Standard growth models investigating if lower income countries catch up with higher income countries consider only physical and human capital. We explore theoretically and empirically whether natural capital also affects the speed of convergence and thus the partial correlation between growth and initial income. A panel analysis for 124 countries from 1996 to 2019 examines the influence of natural capital on convergence. The results indicate that including natural capital impacts convergence directly and indirectly through its interaction with initial levels of income per capita. Convergence paths based on these estimations illustrate how the inclusion of natural capital affects these paths to the steady state. We also consider additional interactions with initial income per capita, nonlinear speeds of convergence, and consideration of the natural capital income share of GDP. Future research should explore further the potential mechanisms and influences of natural capital on the economy and its growth.

Rising regional inequality has renewed interest in place-based infrastructure investments as a tool for promoting local economic development. This study uses the large-scale roll-out of electric transmission infrastructure in Nigeria from 2009 to 2015 to quantify the effect of electrification on internal migration. We address endogenous allocation of electricity infrastructure by estimating effects on peripheral households not directly targeted by the policy, in combination with instrumenting for the actual grid path using a hypothetical least-cost grid. Results show an increase in individual migration propensity by 6 percent and a reduction in household size by 0.8 individuals, mainly driven by young adults and older teenagers. These effects are consistent with electrification relaxing credit constraints while generating limited local employment opportunities for younger individuals. Results from a gravity model of migration show a reduction in the elasticity of migration with respect to movement costs and a rise in migration to rural, electrified destinations following the electricity supply shock. Taken together, these findings suggest that productivity-enhancing place-based infrastructure investments may facilitate out-migration from disadvantaged areas and have unintended implications for regional inequality and urbanization.

Shocks can not only affect home market values but also lock in homeowners and shift the composition of homes that transact. We lay out a new method for examining these outcomes that is motivated by a puzzling divergence in empirical findings on price effects of natural disasters and by a simple theoretical framework we present that illustrates how lock-in and composition shifts can skew price effect estimates. Our method leverages listings started shortly before an exogenous shock, when the decision to list and the choice of a list price, which captures unobservables that the homeowner considers, are not influenced by the shock. We apply this to highly granular and broad data on hurricanes and find that they cause widespread lock-in, meaningful composition shifts, and negative price effects for flooded, nearby, and regional homes. Using the same setting and granular data, we show how traditional approaches like repeat sales and hedonic pricing methods can yield positive price effect estimates, which we believe likely reflects the shift in composition of homes that sell after hurricanes.

Climate change is expected to reduce agricultural productivity in developing countries. Classic international trade and geography models predict that the optimal adaptation response is a reallocation of capital and labor from agriculture towards sectors and regions gaining comparative advantage. In this paper, we provide evidence on the effects of recent changes in climate in Brazil to understand to what extent factor market frictions constrain this reallocation process. We document that persistent increases in dryness do not generate capital reallocation but a sharp reduction in credit to all sectors in both drying areas and financially integrated regions. In addition, dryness generates a large reduction in agricultural employment. Workers staying in drying regions reallocate towards manufacturing, but climate migrants are allocated to small firms outside of manufacturing in destination regions. The evidence suggests that frictions in the interbank market and spatial labor market frictions constrain the reallocation process from agriculture to manufacturing.