Effects of Temperature Shocks on Economic Growth and Welfare in Asia

Minsoo Lee, Mai Lin Villaruel () and Raymond Gaspar
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Mai Lin Villaruel: Asian Development Bank

No 501, ADB Economics Working Paper Series from Asian Development Bank

Abstract: Using the Burke, Hsiang, and Miguel (2015) framework, we examine the nonlinear response effect of economic growth to historic temperature and precipitation fluctuations. We confirm that aside from the significant effect of rising temperature on agricultural production, industrial production and investment endeavors also serve as other potential channels through which temperature significantly affects overall economic productivity. We find the overall economic productivity of developing Asia to be at least 10% lower by 2100 relative to business as usual. We also empirically analyze policy measures and factors that could help countries mitigate consumption volatility driven by climate change-related events. Consistent with several microlevel findings, financial inclusiveness helps households mitigate consumption volatility amid temperature change. Likewise, government plays a critical role in moderating the negative impact of rising temperature in both output and consumption.

Keywords: climate change; consumption volatility; developing Asia; global warming (search for similar items in EconPapers)
JEL-codes: I30 Q54 Q58 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2016-12-14
New Economics Papers: this item is included in nep-env, nep-gro and nep-sea
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Citations: View citations in EconPapers (11)

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