Even temporary rises in local temperatures significantly damage long-term economic growth in the world’s developing nations, according to a new study co-authored by an Massachusetts Institute of Technology economist.
Looking at weather data over the last half-century, the study finds that every 10 C increase in a poor country, over the course of a given year, reduces its economic growth by about 1.3% points.
This only applies, however, to the world’s developing nations; wealthier countries do not appear to be affected by the variations in temperature.
According to Ben Olken, a professor of economics at MIT, who helped conduct the research. “Higher temperatures lead to substantially lower economic growth in poor countries. And while it’s relatively straightforward to see how droughts and hot weather might hurt agriculture, the study indicates that hot spells have much wider economic effects.
Olken says: “What we’re suggesting is that it’s much broader than agriculture. It affects investment, political stability and industrial output.”
The study first gained public attention as a working paper in 2008. It collects temperature and economic-output data for each country in the world, in every year from 1950 through 2003, and analyses the relationship between them.
The study sys that there are a variety of “channels” through which weather shocks hurt economic production — by slowing down workers, commerce, and perhaps even capital investment.
One consequence borne out in the data, is that the higher temperatures in a given year affect not only a country’s economic activity at the time, but its growth prospects far into the future; by the numbers, growth lagged following hot years.
The study, “Temperature Shocks and Economic Growth: Evidence from the Last Half Century,” is by Olken, Melissa Dell PhD, and Ben Jones PhD.
More information: www.web.mit.ed/