How climate change affects potential output

Miles Parker

Economic Bulletin Articles, 2023, vol. 6

Abstract: This article considers how climate change will affect potential output – the highest level of production that an economy can sustain over the long run without driving up inflation. Higher temperatures and changing rainfall patterns are likely to negatively affect certain sectors, notably agriculture and tourism, and impair workers’ productivity. The green transition involves the reallocation of capital and labour across businesses and sectors. In the long run, the impact on potential output depends on the success of that reallocation and on the rate of progress of green innovation. JEL Classification: D24, E24, J21, J22, O33, O40, R11, Q54, Q57

Keywords: Climate change; green transition; potential output (search for similar items in EconPapers)
Date: 2023-09
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbart:2023:0006:2

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