Temperature, rainfall and economic growth in Africa

Following a recent line of research, this paper investigates the aggregated effects of temperature and rainfall on economic growth in Africa. Our econometric approach is based on a reduced-form model and takes account explicitly of parameter heterogeneity and cross section dependence, relying on ARDL modelling and panel estimators with multifactor structures. We find clear supportive evidence of short- and long-run relations between temperature and per-capita GDP growth, while the role played by rainfall appears to be less important and the evidence on its statistical significance is less clear-cut. Very similar results are reported when the analysis is carried out by focusing solely on Sub-Saharan African countries or considering GDP growth per worker. This evidence is in sharp contrast to the results obtained via standard MG estimation and this confirms that, by not controlling for cross section dependence, traditional panel estimators are likely to provide misleading inference. The empirical results suggest that, far from adapting quickly to weather shocks, African economies appear to be significantly damaged by them. In the absence of corrective measures, the current trends in climate change may impose a progressively heavier burden on African countries. Copyright Springer-Verlag Berlin Heidelberg 2014