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Global temperature, R&D expenditure, and growth

Michael Donadelli, Patrick Grüning, 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

Abstract: 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
Date: 2018-06-28
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Working Paper: Global temperature, R&D expenditure, and growth (2017) Downloads
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