The Unassuming Economist

From a paper by Keyang Zhan & Zhengning Pu:

“Firms, in response to risk response, tend to avoid and transfer the risks associated with climate policy uncertainty (CPU) as much as possible, which in turn has a profound impact on household income. We use Chinese prefecture-level cities as the research sample to examine the economic impact of CPU on income inequality. We find that (1) CPU exacerbates income inequality by promoting agglomeration effect, technological bias effect, and automation effect. (2) The negative impact of CPU on income inequality is not obvious in the central region, high administrative level, high capital allocation ability, low labour allocation ability and resource-based cities. (3) Shock duration, effects (as opposed to climate physical risks), and other impacts are examined. Command-and-control environmental regulations can mitigate the potential impacts of CPU, whereas market-based environmental regulations have limited effectiveness. This study examines the potential impacts of CPU on balanced development and high-quality development, providing new insights for the formulation of climate policies and the management of policy risks associated with climate change.”