Clare Balboni, MIT

Coasts contain a disproportionate share of the world’s population, reflecting historical advantages,

but environmental change threatens a reversal of coastal fortune in the coming decades

as natural disasters intensify and sea levels rise. This paper considers whether large infrastructure

investments should continue to favour coastal areas. I use a dynamic spatial equilibrium

framework and detailed georeferenced data from Vietnam to examine this issue and find evidence

that coastal favouritism has significant costs. Road investments concentrated in coastal

regions between 2000 and 2010 had positive returns but would have been outperformed by allocations

concentrated further inland even in the absence of sea level rise. Future inundation

renders the status quo significantly less efficient. Under a central sea level rise scenario, welfare

gains 72% higher could have been achieved by a foresighted allocation avoiding the most vulnerable

regions. The results highlight the importance of accounting for the dynamic effects of

environmental change in deciding where to allocate infrastructure today.

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