Increased Temperatures Damage Developing Economies

August 7th, 2012
in econ_news, syndication

Econintersect:  There have been numerous studies on the possible impacts of climate change on agricultural practices and output (see Nigerian study) global-warming-sweatand costs of mitigating effects of man's carbon footprint on the environment (see EU study).  A paper just published by the American Economic Journal: Macroeconomics measures how the changes in global temperature over the last half century correlate with economic growth over the same period.  The study concludes that the increase in temperature correlates with a slowing of economic growth in developing economies but has no significant correlation in developed countries.

This is not newly disclosed work; the paper has been available as a working paper for several years as the authors, Melissa Dell (Harvard), Benjamin F. Jones (Northwestern) and Benjamin A. Olken (MIT) have contiuned to complete the project.

Follow up:

The abstract of the paper (from Northwestern University .pdf file):

This paper uses historical fluctuations in temperature within countries to  identify its effects on aggregate economic outcomes. We find three primary results. First, higher temperatures substantially reduce economic growth in poor countries. Second, higher temperatures appear to reduce growth rates, not just the level of output. Third, higher temperatures have wide-ranging effects, reducing agricultural output, industrial output, and political stability. These findings inform debates over climate’s role in economic development and suggest the possibility of substantial negative impacts of higher temperatures on poor countries.

Here is a key graphic from the paper:

temperature-and-economic-growth-Olkin-Dell-Jones-2012Click on graphic for larger image.

The paper reports that the negative slope for the regression line for poor countries is statistically significant while the positive slope for rich countries is not significantly different from a flat line.  An implication for Econintersect is that more advanced economies have greater adaptability for environmental changes than do developing economies.

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