The Real Effects of Climate Change in Poor Countries: Evidence from the Permanent Shrinking of Lake Chad

with Remi Jedwab, Roman David Zarate and Carlos Rodriguez Castelán

Due to identification concerns, empirical studies of the economic effects of climate change typically rely on "climate shocks" for their analysis, hence year-to-year climate variations. The effects of slow and permanent changes in climate-driven geographical conditions, i.e. climate change as defined by the IPCC, have been investigated very little in comparison. We focus on Lake Chad, a vast African lake the size of Israel, El Salvador or Massachusetts that, for exogenous reasons, shrunk by 90% between the 1960s and the late 1980s. While water supply decreased, land supply increased, generating a priori ambiguous effects, and making the increasing worldwide disappearance of lakes an important trend to study. For Cameroon, Chad, Nigeria and Niger – 25% of sub-Saharan Africa’s population –, we construct a novel data set tracking population patterns at a fine spatial level from the 1940s to the 2010s. Difference-in-differences show slower growth in the proximity of the lake, but only after the lake started shrinking. Thus, the negative water supply effects on fishing, in addition to farming and herding, outweighed any positive land supply effects. A quantitative spatial model is used to rationalize these results as well as estimate aggregate welfare losses. The model also allows us to study the aggregate and spatial effects of policies related to migration, trade, land use, roads, and cities.

Consumption Cities: Novel Considerations and Evidence

with Remi Jedwab and Elena Ianchovichina 

Cities dramatically vary in their sectoral composition across the world, possibly lending credence to the theory that some cities are production cities with high employment shares of urban tradables while others are consumption cities with high employment shares of urban non-tradables. A model of structural change highlights three paths leading to the rise of consumption cities: resource rents from exporting fuels and mining products, agricultural exports, and premature deindustrialization. These findings appear to be corroborated using both country- and city-level data. Compared to cities in industrialized countries, cities of similar sizes in resource-rich and deindustrializing countries have lower shares of employment in manufacturing, tradable services, and the formal sector, and higher shares of employment in non-tradables and the informal sector. Results on the construction of “vanitous” tall buildings provide additional evidence on the relationship between resource exports and consumption cities. Finally, the evidence suggests that having mostly consumption cities might have economic implications for a country.