Systematic sensitivity analysis of the full economic impacts of sea level rise

Chatzivasileiadis, Teodoros, Estrada, Francisco, Hofkes, Marjan and Tol, Richard (2018) Systematic sensitivity analysis of the full economic impacts of sea level rise. Computational Economics. ISSN 0927-7099

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Abstract

The potential impacts of Sea Level Rise (SLR) due to climate change have been widely studied in the literature. However, the uncertainty and robustness of these estimates has seldom been explored. Here we assess the model input uncertainty regarding the wide effects of SLR on marine navigation from a global economic perspective. We systematically assess the robustness of Computable General Equilibrium (CGE) estimates to model’s inputs uncertainty. Monte Carlo (MC) and Gaussian Quadrature (GQ) methods are used for conducting a Systematic Sensitivity Analysis (SSA). This design allows to both explore the sensitivity of the CGE model and to compare the MC and GQ methods. Results show that, regardless whether triangular or piecewise linear Probability distributions are used, the welfare losses are higher in the MC SSA than in the original deterministic simulation. This indicates that the CGE economic literature has potentially underestimated the total economic effects of SLR, thus stressing the necessity of SSA when simulating the general equilibrium effects of SLR. The uncertainty decomposition shows that land losses have a smaller effect compared to capital and seaport productivity losses. Capital losses seem to affect the developed regions GDP more than the productivity losses do. Moreover, we show the uncertainty decomposition of the MC results and discuss the convergence of the MC results for a decomposed version of the CGE model. This paper aims to provide standardised guidelines for stochastic simulation in the context of CGE modelling that could be useful for researchers in similar settings.

Item Type: Article
Schools and Departments: School of Business, Management and Economics > Economics
Subjects: H Social Sciences > HB Economic theory. Demography
Depositing User: Richard Tol
Date Deposited: 18 Dec 2017 10:10
Last Modified: 22 Jan 2018 12:18
URI: http://sro.sussex.ac.uk/id/eprint/72228

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