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Long-Term Macroeconomic Effects of Climate Change: A Cross-Country Analysis

Matthew Kahn (), Kamiar Mohaddes (), Ryan N. C. Ng, M Pesaran (), Mehdi Raissi and Jui-Chung Yang ()

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: We study the long-term impact of climate change on economic activity across countries, using a stochastic growth model where labour productivity is affected by country-specific climate variables-defined as deviations of temperature and precipitation from their historical norms. Using a panel data set of 174 countries over the years 1960 to 2014, we fi?nd that per-capita real output growth is adversely affected by persistent changes in the temperature above or below its historical norm, but we do not obtain any statistically significant effects for changes in precipitation. Our counterfactual analysis suggests that a persistent increase in average global temperature by 0.04° per year, in the absence of mitigation policies, reduces world real GDP per capita by 7.22 percent by 2100. On the other hand, abiding by the Paris Agreement, thereby limiting the temperature increase to 0.01° per annum, reduces the loss substantially to 1.07 percent. These effects vary signifi?cantly across countries. We also provide supplementary evidence using data on a sample of 48 U.S. states between 1963 and 2016, and show that climate change has a long-lasting adverse impact on real output in various states and economic sectors, and on labour productivity and employment.

Keywords: Climate change; economic growth; adaptation; counterfactual analysis (search for similar items in EconPapers)
JEL-codes: C33 O40 O44 O51 Q51 Q54 (search for similar items in EconPapers)
Date: 2019-07-08
New Economics Papers: this item is included in nep-env and nep-mac
Note: km418, mhp1, rncn2
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Citations: View citations in EconPapers (8) Track citations by RSS feed

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Related works:
Working Paper: Long-Term Macroeconomic Effects of Climate Change: A Cross-Country Analysis (2019) Downloads
Working Paper: Long-term macroeconomic effects of climate change: A cross-country analysis (2019) Downloads
Working Paper: Long-Term Macroeconomic Effects of Climate Change: A Cross-Country Analysis (2019) Downloads
Working Paper: Long-Term Macroeconomic Effects of Climate Change: A Cross-Country Analysis (2019) Downloads
Working Paper: Long-Term Macroeconomic Effects of Climate Change: A Cross-Country Analysis (2019) Downloads
Working Paper: Long-Term Macroeconomic Effects of Climate Change: A Cross-Country Analysis (2019) Downloads
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