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Effects of Temperature Shocks on Economic Growth and Welfare in Asia

Author

Listed:
  • Lee, Minsoo

    (Asian Development Bank)

  • Villaruel, Mai Lin

    (Asian Development Bank)

  • Gaspar, Raymond

    (Asian Development Bank)

Abstract

Using the Burke, Hsiang, and Miguel (2015) framework, we examine the nonlinear response effect of economic growth to historic temperature and precipitation fluctuations. We confirm that aside from the significant effect of rising temperature on agricultural production, industrial production and investment endeavors also serve as other potential channels through which temperature significantly affects overall economic productivity. We find the overall economic productivity of developing Asia to be at least 10% lower by 2100 relative to business as usual. We also empirically analyze policy measures and factors that could help countries mitigate consumption volatility driven by climate change-related events. Consistent with several microlevel findings, financial inclusiveness helps households mitigate consumption volatility amid temperature change. Likewise, government plays a critical role in moderating the negative impact of rising temperature in both output and consumption.

Suggested Citation

  • Lee, Minsoo & Villaruel, Mai Lin & Gaspar, Raymond, 2016. "Effects of Temperature Shocks on Economic Growth and Welfare in Asia," ADB Economics Working Paper Series 501, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0501
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    References listed on IDEAS

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    1. World Bank, 2007. "International trade and Climate Change : Economic, Legal, and Institutional Perspectives," World Bank Publications - Books, The World Bank Group, number 6831, December.
    2. Sanket Mohapatra & George Joseph & Dilip Ratha, 2012. "Remittances and natural disasters: ex-post response and contribution to ex-ante preparedness," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 14(3), pages 365-387, June.
    3. Wolfram Schlenker & Michael J. Roberts, 2008. "Estimating the Impact of Climate Change on Crop Yields: The Importance of Nonlinear Temperature Effects," NBER Working Papers 13799, National Bureau of Economic Research, Inc.
    4. Nkegbe, Paul Kwame & Kuunibe, Naasegnibe, 2014. "Climate variability and household welfare in northern Ghana," WIDER Working Paper Series 027, World Institute for Development Economic Research (UNU-WIDER).
    5. Paul Kwame Nkegbe & Naasegnibe Kuunibe, 2014. "Climate Variability and Household Welfare in Northern Ghana," WIDER Working Paper Series wp-2014-027, World Institute for Development Economic Research (UNU-WIDER).
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Manoranjan Ghosh & Somnath Ghosal, 2021. "Climate change vulnerability of rural households in flood-prone areas of Himalayan foothills, West Bengal, India," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(2), pages 2570-2595, February.
    2. Reis, Lara Aleluia & Emmerling, Johannes & Tavoni, Massimo & Raitzer, David, 2016. "The Economics of Greenhouse Gas Mitigation in Developing Asia," ADB Economics Working Paper Series 504, Asian Development Bank.
    3. Daregot Berihun & Passel Steven, 2022. "Climate variability and macroeconomic output in Ethiopia: the analysis of nexus and impact via asymmetric autoregressive distributive lag cointegration method," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(3), pages 4064-4087, March.
    4. Matthew E. Kahn, 2017. "Will Climate Change Cause Enormous Social Costs for Poor Asian Cities?," Asian Development Review, MIT Press, vol. 34(2), pages 229-248, September.
    5. Tran Thi Kim Oanh & Nguyen Thi Hong Ha, 2023. "Impact of income inequality on climate change in Asia: the role of human capital," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-11, December.
    6. Mr. Sebastian Acevedo Mejia & Claudio Baccianti & Mr. Mico Mrkaic & Natalija Novta & Evgenia Pugacheva & Petia Topalova, 2019. "Weather Shocks and Output in Low-Income Countries: The Role of Policies and Adaptation," IMF Working Papers 2019/178, International Monetary Fund.
    7. Acevedo, Sebastian & Mrkaic, Mico & Novta, Natalija & Pugacheva, Evgenia & Topalova, Petia, 2020. "The Effects of Weather Shocks on Economic Activity: What are the Channels of Impact?," Journal of Macroeconomics, Elsevier, vol. 65(C).
    8. Alano, Emmanuel & Lee, Minsoo, 2016. "Natural Disaster Shocks and Macroeconomic Growth in Asia: Evidence for Typhoons and Droughts," ADB Economics Working Paper Series 503, Asian Development Bank.
    9. Murat Doğanlar & Faruk Mike & Oktay Kızılkaya, 2022. "The impact of climate change on aggregate output in middle‐ and high‐income countries," Australian Economic Papers, Wiley Blackwell, vol. 61(1), pages 72-86, March.
    10. Manoranjan Ghosh & Somnath Ghosal, 2023. "Geographies of vulnerability to climate change: empirical evidences from the Indian Himalayan foothills," Asia-Pacific Journal of Regional Science, Springer, vol. 7(2), pages 405-431, June.

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    More about this item

    Keywords

    climate change; consumption volatility; developing Asia; global warming;
    All these keywords.

    JEL classification:

    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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