Feeling the Heat: Temperature, Physiology & the Wealth of Nations

Geoffrey Heal and Jisung Park

No 19725, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Does temperature affect economic performance? Has temperature always affected social welfare through its impact on physical and cognitive function? While many economic studies have explored the indirect links between climate and welfare (e.g. agriculture, conflict, sea-level rise), few address the possibility of direct impacts operating through physiology, despite a deep medical literature documenting the temperature sensitivity of human task performance. This paper attempts a synthesis of these literatures by (1) presenting a microeconomic model of labor supply under thermal stress, and (2) using country-level panel data on temperature and income (1950-2005) to illustrate the potential magnitude of temperature- driven productivity impacts. Using a fixed effects estimation strategy, we find significant temperature sensitivity of per capita income that varies, crucially, with a country's position relative to an optimal temperature zone. Hotter-than- average years are associated with lower output per capita for countries in hot climates and higher output per capita for countries in cold ones: approximately 3%-4% per degree C in both directions. Air-conditioning mediates the adverse impact of hotter years, consistent with the physiological explanation. This more direct causal link between climate and social welfare has important implications for both the economics of climate change and comparative development.

JEL-codes: J01 Q54 Q56 (search for similar items in EconPapers)
Date: 2013-12
New Economics Papers: this item is included in nep-agr and nep-env
Note: EEE LS
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Citations: View citations in EconPapers (37)

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Working Paper: Feeling the Heat: Temperature, Physiology & the Wealth of Nations (2014)
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