Going NUTS: the regional impact of extreme climate events over the medium term

Guzman Gonzalez-Torres Fernandez, Miles Parker and Sehrish Usman

No 3002, Working Paper Series from European Central Bank

Abstract: The projected increase in extreme climate events in the coming decades is likely to exacerbate the existing productivity and demographic challenges facing Europe. We study the dynamic, medium-run macroeconomic effects of heatwaves, droughts and floods in 1160 EU regions through the lens of a local projections, difference in difference framework. Summer heatwaves and droughts lower medium-term output, but the impact from floods depends on regional income levels. High-income regions witness reconstruction activity, less wealthy regions do not. We find evidence of population decline in affected regions as well as adaptation spending post-event, which lowers regional productivity. JEL Classification: D24, E24, J22, R11, Q54

Keywords: difference in difference; extreme climate; labour market; local projections; potential output; productivity; weather (search for similar items in EconPapers)
Date: 2024-11
New Economics Papers: this item is included in nep-eec, nep-env, nep-lma and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20243002

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