The Great Divide: Environmental Migration as a Response to Climate Change and Policy in North and South

Abstract We study environmental migration in an endogenously growing world economy divided into developed and less developed countries. Climate change has a regional impact; it affects incomes and induces international migration. We derive analytical solutions for the migration stock in market equilibrium and in social optimum and calculate its effects on income and development. We find that international migration raises welfare at a global level and at the aggregate level in the North. Migration augments average welfare in the South but reduces welfare per capita in the North. When returns to knowledge capital are decreasing, steady migration can support a constant consumption growth rate at the world level. Climate policy implemented by the North reduces migration and improves global welfare. In the quantitative part we illustrate long-run development paths under different assumptions and parameter constellations.