Temperature Shocks and Economic Growth DELL.pdf - Temperature Shocks and Economic Growth Evidence from the Last Half Century Melissa Dell MIT Benjamin F

Temperature Shocks and Economic Growth DELL.pdf -...

This preview shows page 1 - 3 out of 42 pages.

Temperature Shocks and Economic Growth: Evidence from the Last Half Century Melissa Dell MIT Benjamin F. Jones Northwestern University and NBER Benjamin A. Olken MIT and NBER August 2011 ABSTRACT 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. We thank Daron Acemoglu, Steven Davis, Esther Duflo, Douglas Gollin, Michael Greenstone, Jonathan Gruber, Seema Jayachandran, Charles Jones, Peter Klenow, Ross McKitrick, William Nordhaus, Elias Papaioannou, Fabrizio Perri, Richard Tol, Carl Wunsch, four anonymous referees, and numerous seminar participants for helpful comments and suggestions. Contact emails: [email protected]; [email protected]; [email protected]
Image of page 1

Subscribe to view the full document.

1 1. Introduction At least since Montesquieu’s The Spirit of Laws (1750), which argued that an “excess of heat” made men “slothful and dispirited”, it has been debated whether temperature is – or is not – central to understanding economic development. In this paper, we use historical fluctuations in temperature within countries to identify its effects on aggregate economic outcomes. We use this approach to inform old debates about the role of temperature in economic development and new debates about possible impacts of future warming. The relationship between temperature and aggregate economic activity has traditionally been quantified using two approaches. One approach, emphasized in the growth and development literatures, has examined the relationship between average temperature and aggregate economic variables in cross-sections of countries (e.g. Sachs and Warner 1997; Gallup, Sachs, and Mellinger 1998; Nordhaus 2006). In contemporary data, it is well known that hot countries tend to be poor, with national income falling 8.5% per degree Celsius in the world cross-section (Dell et al. 2009). However, many argue that this correlation is driven by spurious associations of temperature with national characteristics such as institutional quality (e.g., Acemoglu, Johnson, and Robinson 2002; Rodrik, Subramanian, and Trebbi 2004). The second approach relies on micro-evidence to quantify various climatic effects and then aggregates these to produce a net effect on national income. This approach is embedded within Integrated Assessment Models (IAM), which are utilized extensively in the climate change literature to model climate-economy interactions and form the basis of many policy recommendations regarding greenhouse gas emissions. A fundamental challenge for this
Image of page 2
Image of page 3

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Ask Expert Tutors You can ask 0 bonus questions You can ask 0 questions (0 expire soon) You can ask 0 questions (will expire )
Answers in as fast as 15 minutes