Long-Run Economic Impacts of Climate Volatility

KuK Mo Jung () and Sungwon Lee ()
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KuK Mo Jung: Department of Economics, Sogang University, Seoul, Korea
Sungwon Lee: Department of Economics, Sogang University, Seoul, Korea

No 2502, Working Papers from Nam Duck-Woo Economic Research Institute, Sogang University (Former Research Institute for Market Economy)

Abstract: We estimate long-run economic impacts of climate volatility by employing a stochastic frontier model where climate volatility is additionally included into the production frontier. Our climate panel dataset covers 157 countries over the period 1950-2014. We finnd that both temperature and precipitation affect production possibilities in a hump-shaped way. Most importantly, temperature volatility turns out to reduce long- term potential output. This negative effect is found to be statistically significant, and various robustness checks, including income as well as temperature heterogeneity across nations, confirm it. We also find short-term weather anomalies, either temperature or precipitation, are found to be insignificant across all specifications. Our findings provide supporting empirical evidence for a growing body of Integrated Assessment Model literature, emphasizing the role of uncertainty about global temperature dynamics.

Keywords: climate change; long-term climate volatility; stochastic frontier analysis (search for similar items in EconPapers)
JEL-codes: D24 O44 O47 Q54 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2025
New Economics Papers: this item is included in nep-agr, nep-eff and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:sgo:wpaper:2502

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