Long-Term Macroeconomic Effects of Climate Change

By Matthew E. Kahn, Kamiar Mohaddes, Ryan N. C. Ng, M. Pesaran, Maizar Raissi, Jui‐Chung Yang. IMF Working Papers, 2019

502 citations recorded by the source corpus.

We study the long-term impact of climate change on economic activity across countries, using a stochastic growth model where labor productivity is affected by country-specific climate variables—defined 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 find that per-capita real output growth is adversely affected by persistent changes in the temperature above or below its historical norm, but we do not obtain any statistically significant effects 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 more than 7 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 about 1 percent. These effects vary significantly across countries depending on the pace of temperature increases and variability of climate conditions. 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 labor productivity and employment.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/ce1a6aefeb52f9fbed1cf5400ce0c9458507cca2

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Citations in the corpus

• A Meta-Analysis of the Total Economic Impact of Climate Change (2022, background): “Previous studies mixed growth and level effects without further ado in a graph (Kahn et al., 2019, Rose et al., 2022) or a meta-analysis Howard and Sterner (2017).”
• The Economics of Climate Change (2018, methodology): “1 As part of our research, we also used the methodology that was proposed by Kahn et al. (2021). The authors used abnormal temperature change to predict GDP per capita. The trend is similar to what we found using Burke, Hsiang, and Miguel. We based our analysis on Burke, Hsiang, and Miguel because t”
• THE ROLE OF SUSTAINABLE FINANCE IN ACHIEVING SUSTAINABLE DEVELOPMENT GOALS: DOES IT WORK? (2020, background): “Based on the analysis of risks and challenges environmental damage is a crucial among negative externalities (Centemeri, 2009), it’s also one of an effect of climate change (Kahn et al., 2019) and climate change is a major example of an integrated approach spanning a range of goals (Elder & Olsen, 2”
• The appallingly bad neoclassical economics of climate change (2020, unknown): “(Kahn et al., 2019, p. 4) Their predictions for GDP change, as a function of temperature change, is the shaded region in Figure 10 (which reproduces their Figure 2).”
• The impact of climate vulnerability on firms’ cost of capital and access to finance (2021, background): “, Burke, Hsiang, & Miguel, 2015; Klomp & Valckx, 2014; Kompas, Pham, & Che, 2018; Kahn et al., 2019). Although impacts differ across countries, there is a consensus that the biggest impacts of climate change are being felt in developing countries. One interesting dimension of these economic costs re”