Stephie Fried (Arizona State University)

Thursday, March 22, 2018 - 3:40 pm to 5:00 pm

Stephie FriedLocation: 368A Heady Hall

Description: Stephie Fried
"Storm Drains and Seawalls: A Quantitative Macro Study of Climate Adaptation"

Abstract: We develop a three-part strategy to quantify the existing level of extreme weather adaptation and its contribution to the reduction in damage from a weather event. First, we design a dynamic macroeconomic model in which heterogeneous localities optimally choose investment in adaptation capital based on their Bayesian beliefs over the risk of extreme weather. Second, we estimate the relationship between a county's Bayesian beliefs (determined by its history of weather events) and a measure of the damage per weather event across a panel of U.S. counties. Third, we calibrate the model to  match our empirical estimates and back out the level and effectiveness of adaptation capital.  Preliminary results suggest that in regions with a high risk for extreme weather, adaptation capital is approximately 1.9 percent of the total capital stock and reduces the damage from an extreme weather event by over 70 percent.