No matter how it is measured, income declines with global warming

Pin Ng and Xiaobing Zhao

Ecological Economics, 2011, vol. 70, issue 5, 963-970

Abstract: The contemporaneous relationship between temperature and income is important because it enables economists to estimate the economic impact of global warming without assuming a structural model. Until recently, empirical evidence generally suggests that there is a negative relationship between temperature and income, and, therefore, global warming has an adverse impact on economic activity. However, Nordhaus (2006) argues that the temperature-income relationship depends on how income is measured. We show in this paper that the results of Nordhaus (2006) may be due to an omitted-variable problem. Based on a well-motivated temperature-income model, we find that the relationship between temperature and income is not dependent on income measurement. Our regression results show that the adverse impact of an increase of 1 °C in temperature can be as much as a 3% decrease in total income for the G-7 nations. Therefore, our results suggest an aggressive climate mitigation policy.

Keywords: Temperature; Income; Global; warming; Quantile; regression (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (8)

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