Temperature Shocks and Economic Growth: Evidence from the Last Half Century

TLDR

The study aims to identify the effects of temperature fluctuations on aggregate economic outcomes. It does so by using historical temperature variations within countries. The study finds that higher temperatures substantially reduce economic growth in poor countries, lower growth rates rather than just output levels, and broadly diminish agricultural, industrial output and political stability. JEL codes: E23, O13, Q54, Q56.

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 may 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. (JEL E23, O13, Q54, Q56)