Global temperature, R&D expenditure, and growth
Marcus Jüppner () and
Renatas Kizys ()
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Renatas Kizys: Faculty of Business and Law, University of Portsmouth
No 9, Bank of Lithuania Discussion Paper Series from Bank of Lithuania
We shed new light on the macroeconomic effects of rising temperatures. In the data, a shock to global temperature dampens research and development (R&D) expenditure growth. This novel empirical evidence is rationalised within a stochastic endogenous growth model. In the model, Temperature shocks undermine economic growth via a drop in R&D. Moreover, temperature risk generates welfare costs of 13.50% of lifetime utility. The government can offset these welfare costs by subsidizing investment with 1.02% or R&D expenditure with 0.52% of total public spending, respectively. Alternatively, it can levy a lump-sum tax on households which finances 0.64% of total public spending.
Keywords: Global temperature; Endogenous growth; R&D expenditure; Welfare costs (search for similar items in EconPapers)
JEL-codes: E30 G12 Q00 (search for similar items in EconPapers)
Pages: 67 pages
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Working Paper: Global temperature, R&D expenditure, and growth (2017)
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