Who Wins and Who Loses? How Human Capital Concentration Shapes the Economic and Political Effects of the Green Transition
P2-S33-1
Presented by: Max Bradley
What is the role of local communities in determining the winners and losers of the green transition? Some communities are more exposed to the effects of the transition compared with others due to the presence of firms / sectors vulnerable to decarbonization policies. While it is often assumed that all ‘transition-exposed’ communities bear economic costs, I contend that some also stand to benefit economically. Benefitting requires firms and workers to leverage new investments and opportunities arising from the transition. Thus, I argue that the local concentration of human capital – the skills and knowledge within a community – is a key determinant of which communities emerge as the economic 'winners' or 'losers' of the transition. This economic divide shapes local attitudes: residents in 'losing' communities oppose the transition, while this effect dissipates in 'winning' communities. These attitudes extend beyond those directly affected by the transition, indicating a ‘sociotropic’ mechanism. I test this argument in the UK, leveraging local-authority level economic and census data, as well as individual-level panel data. Using difference-in-differences and event study designs, I demonstrate that since the 2008 Climate Change Act was introduced, communities with lower (higher) levels of human capital have seen a decline (improvement) in the economic performance of transition-exposed sectors. Then, by merging contextual-level indicators with individual-level data, I show that residents in ‘losing’ areas display opposition to the transition, while this effect is mitigated in ‘winning’ areas. These findings highlight the need for carefully targeted transition assistance and investment policies.
Keywords: Green-Transition; Human-Capital; Economy; Community; Sociotropic