The aim of this work is to apply a methodology combining the top-down approach (sub-national CGE model) and the bottom-up approach (DIVA model) to assess the economic general equilibrium effects of Sea Level Rise in the Italian regions by the end of 21st century. Previous macro-economic analyses providing estimates of potential damages occurring from Sea Level Rise for Italy are at country scale. Our approach goes more in detail considering differences in vulnerability across regions, as well as capturing all the economic interactions among the Italian sub-national regions and between each sub-national region and the rest of the world. This assessment allows analyzing how economic agents may respond to change in relative prices following the productivity loss in the resource induced by the climate change impact (market-driven or autonomous adaptation). In order to manage the uncertainty related to the integration’s degree across the regional economies, we build both a rigid and a flexible version of the regionalized CGE model. This allows us to control the economic effects of Sea Level Rise when the flexibility in the Italian economy changes. Results show that Emilia Romagna and Veneto are the most affected regions in all the scenarios. In the flexible model we can observe a reallocation of capital and labor from these regions to the landlocked regions.
- jel: C68, D58, Q50, R11, R12, R13
- Keywords: CGE models, Regional economics, Sea Level Rise