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Source: International Monetary Fund

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

Author/Editor:

Matthew E. Kahn ; Kamiar Mohaddes ; Ryan N. C. Ng ; M. Hashem Pesaran ; Mehdi Raissi ; Jui-Chung Yang

Publication Date:

October 11, 2019

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

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.

Series:

Working Paper No. 19/215

English

Publication Date:

October 11, 2019

ISBN/ISSN:

9781513514598/1018-5941

Stock No:

WPIEA2019215

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

59

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