Long-Term Macroeconomic Effects of Climate Change: A Cross-Country Analysis [report]

Matthew Kahn, Kamiar Mohaddes, Ryan N.C. Ng, M. Hashem Pesaran, Mehdi Raissi, Jui-Chung Yang
2019 unpublished
We study the long-term impact of climate change on economic activity across countries, using a stochastic growth model where labour productivity is a¤ected by country-speci...c climate variables-de...ned as deviations of temperature and precipitation from their historical norms. Using a panel data set of 174 countries over the years 1960 to 2014, we ...nd that per-capita real output growth is adversely a¤ected by persistent changes in the temperature above or below its historical norm, but we
more » ... not obtain any statistically signi...cant e¤ects for changes in precipitation. Our counterfactual analysis suggests that a persistent increase in average global temperature by 0.04 C per year, in the absence of mitigation policies, reduces world real GDP per capita by 7.22 percent by 2100. On the other hand, abiding by the Paris Agreement, thereby limiting the temperature increase to 0.01 C per annum, reduces the loss substantially to 1.07 percent. These e¤ects vary signi...cantly across countries. We also provide supplementary evidence using data on a sample of 48 U.S. states between 1963 and 2016, and show that climate change has a long-lasting adverse impact on real output in various states and economic sectors, and on labour productivity and employment. JEL Classi...cations: C33, O40, O44, O51, Q51, Q54.
doi:10.3386/w26167 fatcat:nbyej66cgjbjxmeinnkavpywd4