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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 ()

No 7738, CESifo Working Paper Series from CESifo

Abstract: We study the long-term impact of climate change on economic activity across countries, using a stochastic growth model where productivity is affected by deviations of temperature and precipitation from their long-term moving average historical norms. Using a panel data set of 174 countries over the years 1960 to 2014, we find 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. We also show that the marginal effects of temperature shocks vary across climates and income groups. 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 more than 7 percent by 2100. On the other hand, abiding by the Paris Agreement goals, thereby limiting the temperature increase to 0.01℃ per annum, reduces the loss substantially to about 1 percent. These effects vary significantly across countries depending on the pace of temperature increases and variability of climate conditions. The estimated losses would increase to 13 percent globally if country-specific variability of climate conditions were to rise commensurate with annual temperature increases of 0.04℃.

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
New Economics Papers: this item is included in nep-env, nep-gro and nep-mac
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Related works:
Journal Article: Long-term macroeconomic effects of climate change: A cross-country analysis (2021) 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
Working Paper: Long-Term Macroeconomic Effects of Climate Change: A Cross-Country Analysis (2019) Downloads
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