Impact of Climate Change on Long-run Economic Growth: Cross-country Growth Regression

Released on by A. Girma
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  • Impact of Climate Change on Long-run Economic Growth: Cross-country Growth Regression Book Detail

  • Author : A. Girma
  • Release Date : 2012
  • Publisher :
  • Genre :
  • Pages : 97
  • ISBN 13 :
  • File Size : 1,1 MB
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Impact of Climate Change on Long-run Economic Growth: Cross-country Growth Regression by A. Girma PDF Summary

Book Description: Using historical data for annual temperature and precipitation for 166 sample countries, we assessed the impact of climate change on long-run economic growth over a period 2003 to 2012. Our study addresses a general research question that “What is the impact of climate change on long-run economic growth?” In the first part of our analysis we conducted cross-sectional regressions of income per-capita against long-run average temperature and precipitation with appropriate explanatory variables in a Solow growth model. Despite the negative relationship between average temperature/precipitation and long-run level of income, in sum, our results confirm that there is no statistical significant effect of climate variability on the long-run level of income. Using Barro-type regression framework, our result on the cross-sectional relationship between mean temperature and growth rate shows that the growth rate of national income per capita falls 0.77% per degree Celsius rise in temperature. Our result also suggests that growth rate of national income per capita falls as a result of climate volatility. The regression result for effects of climate volatility shows that any deviation of temperature from its long-run average is associated with a reduction in GDP per capita growth of about 1.421 percentage points. A deviation of precipitation from its long-run average is associated with a statistically significant reduction in GDP per capita growth of about 1.051 percentage points. Therefore, our finding yields a conclusion that besides the finding that warmer temperature reduces economic growth, the more volatile climate hugely affects the economic growth of a country. Our result also revealed that the hotter countries tend to be poorer than the warmer counterparts. The impact of one degree Celsius average temperature increase in year on the long-run economic growth of poor countries is a 1.5% decrease in economic growth. It is also found that poor countries grow faster than rich ones so that there is economic convergence across countries.

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Ending poverty and stabilizing climate change will be two unprecedented global achievements and two major steps toward sustainable development. But the two obje