Political ``Color" and the Impact of Climate Risks on Output Growth: Evidence from a Panel of US States

Xin Sheng (), Rangan Gupta, Oguzhan Cepni and Masego Motsuenyane ()
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Xin Sheng: Lord Ashcroft International Business School, Anglia Ruskin University, Chelmsford, United Kingdom
Masego Motsuenyane: Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa

No 202449, Working Papers from University of Pretoria, Department of Economics

Abstract: In this paper we show that the effect of climate risks on economic growth in a panel of 48 contiguous states of the US is contingent on the party affiliation of the local politicians, as captured by a Democratic-Republican Index (DRI). Specifically, our results, based on a regime-dependent local projections model, depict that extreme weather-related shocks tend to negatively impact output growth more severely, especially in the medium- to long-run, in the Republican-leaning states with low-DRI values compared to those that are characterized by high-DRIs over the annual period of 1967 to 2023. In addition, when we incorporate the information on states that have undertaken explicit targets for reduction of Green House Gas emissions, following the Climate Change Action Plan implemented in 1993, we find that the significant long-horizon negative effect continues to hold only for the states with low-DRIs, i.e., are Republicans-oriented.

Keywords: Severe weather; Output Growth; US States; Linear and Nonlinear Local Projections; Impulse Response Functions; Political Orientation (search for similar items in EconPapers)
JEL-codes: C23 Q54 R11 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2024-11
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:202449

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