Schelling's Conjecture on Climate and Development: A Test

Abstract

We use the integrated assessment model FUND to compute the income elasticities of climate change impacts for different world regions over time. We find limited support for Schelling?s Conjecture that development might be the best defense against climate change impacts, and for the idea that the impacts from climate change might be akin to a ?luxury good?. For very poor regions, an increase in income in the short run is an effective tool to reduce impacts from climate change by making those societies less vulnerable, in particular to infectious diseases. While net climate impacts appear to be akin to a luxury good for some countries at specific times, that effect disappears in the long run as impacts from agriculture make up a large share of total impacts.