Taco Prins (ASE, UvA) - "A Macro Finance Model of Optimal Flood Protection"

Further investment in flood protection will be a major part of the climate adaptation strategy of the Netherlands, but the extent of future mean sea level rise and economic growth is uncertain. The literature on optimal investment in flood protection tends to consider a range of economic and climate scenarios, sidestepping the question of how an optimal investment strategy should account for the uncertainty underlying these scenarios. To resolve this question, I construct a representative agent model with Epstein-Zin preferences, stochastic economic growth, and economic and flooding disaster risks. The representative agent optimises over the consumption level, as well as the investment in productive capital and in flood protection. I obtain a numerical solution for the full model, and an analytical solution for a simplified version of the model. I establish that there exists an optimal level of flood protection that is a function of the volatility of economic growth, among other things. The elasticity of intertemporal substitution (EIS) turns out to be a key parameter mediating the effect of many model parameters on optimal flood protection.

Yasmine van der Straten (ABS, UvA) - "The Implications of Climate Change and Adaptation on Housing, Financial Assets & Redistribution"

I study the implications of climate change and adaptation on housing and financial assets, as well as on redistribution more broadly. I embed climate change in a redistributive growth model by introducing exposure of households and firms to extreme weather events, that damage their housing capital and physical capital, respectively. The analysis reveals that climate change is intrinsically redistributive, as it amplifies both wage and wealth inequality. Low-income workers experience a relatively larger decline in income due to their exposure to climate-related damages, while the rate at which households with positive savings accumulate wealth rises. Furthermore, I find that adapting to climate change is more challenging for low-income households who are financially constrained, and the failure to reduce vulnerability to climate impacts exacerbates wealth inequality. Additionally, while houses that face climate risk trade at a discount in the market, I demonstrate that the materialization of climate change risk puts upward pressure on house prices, as the supply of such houses becomes reduced. This general equilibrium effect is propagated and amplified over time.

About the SEEMS Seminars

Over the past years the number of researchers at UvA Economics & Business that work on Environmental Economics and Sustainability has increased significantly. To provide a natural meeting place for them, we have started a series of Seminars on Environmental Economics and Management of Sustainability (SEEMS).

The series’ first main goal is to increase the visibility of Environmental Economics and the Management of Sustainability at UvA and the visibility of UvA within these fields. Its second main goal is to give PhD candidates working on topics in these fields access to the frontier of knowledge, and to provide them with a training ground where they can present and discuss their ideas.

Are you interested?

This will be a hybrid seminar. If you are interested in joining this seminar, please send an email to the secretariat of ASF at asf-feb@uva.nl.