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Revisiting the temperature-economic growth relationship using global subnational data
Xiaobing Zhao1, Mason Gerety1, Nicolai V Kuminoff2
1The W. A. Franke College of Business, Northern Arizona University, 20 W. McConnell Drive, NAU Box 15066 Flagstaff, AZ 86011-5066, USA.
Journal of Environmental Management
|July 1, 2018
Summary
Warmer temperatures hinder economic growth, especially in lower-income nations. This study reveals that even within countries, regional climate vulnerability and economic impacts vary significantly with temperature.
Area of Science:
- Environmental Economics
- Climate Change Impact Assessment
- Economic Geography
Background:
- Existing research links higher annual temperatures to negative economic output and growth using national-level data.
- Significant spatial variations in temperature and productivity exist within countries, suggesting a need for subnational analysis.
Purpose of the Study:
- To investigate the relationship between temperature and economic growth at a subnational level using detailed geographic data.
- To explore the nonlinear effects of temperature on economic growth within countries, considering regional heterogeneity.
Main Methods:
- Utilized subnational short panel data from 10,597 grid cells across the terrestrial Earth.
- Employed a quadratic model to analyze the relationship between cell-level economic growth and temperature.
- Differentiated analysis for countries with below-median per-capita incomes.
Main Results:
- Economic growth in lower-income countries shows a concave relationship with temperature, peaking at approximately 16°C.
- Climate vulnerability and economic impacts of temperature variations differ at the regional level, even within countries of similar development.
- Accounting for nonlinear, within-country temperature-growth relationships reveals larger impacts of warming compared to analyses ignoring this heterogeneity.
Conclusions:
- Subnational analysis is crucial for understanding the nuanced impacts of climate on economic growth.
- Policies addressing climate change and economic development must consider regional disparities in temperature vulnerability.
- The nonlinear nature of temperature's effect on economic growth necessitates localized adaptation and mitigation strategies.
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