New publication: The impact of weather on economic growth and its production factors

Together with Martin Henseler I just published an article entitled “The impact of weather on economic growth and its production factors” in the journal Climatic Change.

Here is the abstract:

We investigate the influence of weather on countries’ GDP and their main components of production, namely total factor productivity, capital stock, and employment. Our panel dataset includes annual observations on 103 countries for the period 1961–2010. We find that the main impacts of weather occur through temperature and drive the growth in GDP. Our results show that, for higher levels of temperature, the poor countries are much more strongly impacted than the rich countries. We also find that weather impacts per capita GDP growth through all its factors of production, with the largest impacts on total factor productivity. Again it is the poor countries for which these impacts are the strongest. The findings provide empirical evidence for negative impacts of temperature on economic growth and its factors of production and furthermore point towards climate change as an important driver of international inequality.

For journalists or non-academic readers, a non-scientific version of our article just went online at the magazine The Ecologist.

The main conclusion of this article is the following:

Climate change already prevents poor countries from reaching their full growth potential, and with increasing future temperatures they are going to fall even further away from that potential.

The cumulative effects can be horrendous. The solutions for this problem are well-known.

For governments: price carbon via a tax or via cap-and-trade. If necessary regulate companies and consumers.

For individuals: don’t vote for nationalists. Someone who places “America first” or who views migrants as the source of evil is clearly unfamiliar with how the world works. Within a family nobody really places the own interests above those of the other family members. International cooperation between countries should not – and can not – work any differently. Also, think twice before you buy – do you really need this?

For companies: Yes, prices matter, productivity is important, shareholder value a useful indicator. But do not be mistaken: There very often is little trade-off between producing green and sustainably and staying same-old-same-old. Going green and sustainable, and doing this well, is only a matter of good leadership.

Some information about my co-author:

Martin Henseler holds a PhD in agricultural science from the University of Hohenheim and is specialized in agricultural economics. From 2008 to 2012 Martin worked for the Joint Research Center-IPTS of the European Comission (Sevilla). Between 2012 and 2016 Martin continued his research activities as a freelance researcher. Martin has been working at the Thünen Institute of Rural Studies since 2017. He is affiliated to the Partnership for Economic Policy (PEP) Network and to L’Equipe D’Economie Le Havre – Normandie (EDEHN) of the University of Le Havre. Martin currently works on the regional estimation of microplastic emissions into agricultural soils, as well as on regional agro-economic models in agricultural and environmental policy impact analysis (applied to water quality, biofuels, greenhouse gas emissions, mitigation measures and impacts of climate change).

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