Adapt or be flooded

a column by Klaus Desmet, Dávid Krisztián Nagy and Esteban Rossi-Hansberg for VOX: CEPR’s Policy Portal

Assessments of the economic cost of a rise in sea-level are often limited to estimating the current value of structures and output in low-lying coastal areas.

This column argues that understanding how economic activity will move when faced with flooding is key to correctly evaluating the cost of permanent inundation. When using a high-resolution dynamic spatial model of the world economy, combined with state-of-the-art local projections of sea-level rise for the next 200 years, the cost is substantially lower than when ignoring adaptation through moving. There is huge heterogeneity across space though, with some low-lying coastal areas hit particularly hard.

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