IDEAS home Printed from https://ideas.repec.org/p/zbw/bofitp/bdp2015_027.html
   My bibliography  Save this paper

Could climate change affect government expenditures? Early evidence from the Russian regions

Author

Listed:
  • Leppänen, Simo
  • Solanko, Laura
  • Kosonen, Riitta

Abstract

This paper explores the implications of climate change for government expenditures. Using a rich sub-national dataset for Russia covering 1995–2009, we estimate the impacts of changes in climatic conditions through short-term variation and medium-term changes in average regional temperatures and precipitation. We show a strong and robust negative (but non-linear) relation between regional budget expenditures and population-weighted temperature. The results indicate that an increase in temperature results in a decrease in public expenditures and that the magnitude of this effect diminishes the warmer the region. Further, our results suggest that the benefits from warming accumulate and that adaptation measures could help leverage those benefits. The estimated decreases in regional government expenditure are, however, quite small. It should be noted that our results are estimated for a scenario of mild temperature increase (1–2 °C). Larger temperature increases are likely to have dramatic consequences e.g. from loss of permafrost and methane release that are impossible to predict with available historical data.

Suggested Citation

  • Leppänen, Simo & Solanko, Laura & Kosonen, Riitta, 2015. "Could climate change affect government expenditures? Early evidence from the Russian regions," BOFIT Discussion Papers 27/2015, Bank of Finland Institute for Emerging Economies (BOFIT).
    • Handle: RePEc:zbw:bofitp:bdp2015_027
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/212837/1/bofit-dp2015-027.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Durevall, Dick & Henrekson, Magnus, 2011. "The futile quest for a grand explanation of long-run government expenditure," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 708-722, August.
    2. Eduardo Borensztein & Eduardo Cavallo & Patricio Valenzuela, 2009. "Debt Sustainability Under Catastrophic Risk: The Case for Government Budget Insurance," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 12(2), pages 273-294, September.
    3. Lis, Eliza & Nickel, Christiane, 2009. "The impact of extreme weather events on budget balances and implications for fiscal policy," Working Paper Series 1055, European Central Bank.
    4. John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
    5. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769.
    6. Olivier Deschênes & Michael Greenstone, 2007. "The Economic Impacts of Climate Change: Evidence from Agricultural Output and Random Fluctuations in Weather," American Economic Review, American Economic Association, vol. 97(1), pages 354-385, March.
    7. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2014. "What Do We Learn from the Weather? The New Climate-Economy Literature," Journal of Economic Literature, American Economic Association, vol. 52(3), pages 740-798, September.
    8. Olivier Deschênes & Michael Greenstone, 2011. "Climate Change, Mortality, and Adaptation: Evidence from Annual Fluctuations in Weather in the US," American Economic Journal: Applied Economics, American Economic Association, vol. 3(4), pages 152-185, October.
    9. Migara O. De Silva & Galina Kurlyandskaya & Elena Andreeva & Natalia Golovanova, 2009. "Intergovernmental Reforms in the Russian Federation : One Step Forward, Two Steps Back?," World Bank Publications - Books, The World Bank Group, number 2668, December.
    10. Olivier Deschênes & Michael Greenstone, 2012. "The Economic Impacts of Climate Change: Evidence from Agricultural Output and Random Fluctuations in Weather: Reply," American Economic Review, American Economic Association, vol. 102(7), pages 3761-3773, December.
    11. Raj M. Desai & Lev M. Freinkman & Itzhak Goldberg, 2003. "Fiscal federalism and regional growth : evidence from the Russian Federation in the 1990s," Policy Research Working Paper Series 3138, The World Bank.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:zbw:bofitp:2015_027 is not listed on IDEAS
    2. Simo Leppänen & Laura Solanko & Riitta Kosonen, 2017. "The Impact of Climate Change on Regional Government Expenditures: Evidence from Russia," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(1), pages 67-92, May.
    3. Leppänen, Simo & Solanko, Laura & Kosonen, Riitta, 2015. "Could climate change affect government expenditures? Early evidence from the Russian regions," BOFIT Discussion Papers 27/2015, Bank of Finland, Institute for Economies in Transition.
    4. Severen, Christopher & Costello, Christopher & Deschênes, Olivier, 2018. "A Forward-Looking Ricardian Approach: Do land markets capitalize climate change forecasts?," Journal of Environmental Economics and Management, Elsevier, vol. 89(C), pages 235-254.
    5. Antonio Bento & Noah S. Miller & Mehreen Mookerjee & Edson R. Severnini, 2020. "A Unifying Approach to Measuring Climate Change Impacts and Adaptation," NBER Working Papers 27247, National Bureau of Economic Research, Inc.
    6. Olivier Deschenes & Kyle C. Meng, 2018. "Quasi-Experimental Methods in Environmental Economics: Opportunities and Challenges," NBER Working Papers 24903, National Bureau of Economic Research, Inc.
    7. Hsing-Hsiang Huang & Michael R. Moore, 2018. "Farming under Weather Risk: Adaptation, Moral Hazard, and Selection on Moral Hazard," NBER Chapters, in: Agricultural Productivity and Producer Behavior, pages 77-124, National Bureau of Economic Research, Inc.
    8. Joshua Graff Zivin & Solomon M. Hsiang & Matthew Neidell, 2018. "Temperature and Human Capital in the Short and Long Run," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 5(1), pages 77-105.
    9. Sedova, Barbora & Kalkuhl, Matthias, 2020. "Who are the climate migrants and where do they go? Evidence from rural India," World Development, Elsevier, vol. 129(C).
    10. Emediegwu, Lotanna E. & Wossink, Ada & Hall, Alastair, 2022. "The impacts of climate change on agriculture in sub-Saharan Africa: A spatial panel data approach," World Development, Elsevier, vol. 158(C).
    11. Kaixing Huang, 2015. "The Economic Impacts of Global Warming on Agriculture: the Role of Adaptation," School of Economics and Public Policy Working Papers 2015-20, University of Adelaide, School of Economics and Public Policy.
    12. Graff Zivin, Joshua & Song, Yingquan & Tang, Qu & Zhang, Peng, 2020. "Temperature and high-stakes cognitive performance: Evidence from the national college entrance examination in China," Journal of Environmental Economics and Management, Elsevier, vol. 104(C).
    13. Riccardo Colacito & Bridget Hoffmann & Toan Phan, 2019. "Temperature and Growth: A Panel Analysis of the United States," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(2-3), pages 313-368, March.
    14. David Albouy & Walter Graf & Ryan Kellogg & Hendrik Wolff, 2016. "Climate Amenities, Climate Change, and American Quality of Life," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(1), pages 205-246.
    15. David Castells-Quintana & Maria del Pilar Lopez-Uribe & Tom McDermott, 2015. "Climate change and the geographical and institutional drivers of economic development," GRI Working Papers 198, Grantham Research Institute on Climate Change and the Environment.
    16. Haroon Mumtaz & Angeliki Theophilopoulou, "undated". "The distributional effects of climate change. An empirical analysis," Working Papers 966, Queen Mary University of London, School of Economics and Finance.
    17. Rémi Generoso & Cécile Couharde & Olivier Damette & Kamiar Mohaddes, 2020. "The Growth Effects of El Niño and La Niña: Local Weather Conditions Matter," Annals of Economics and Statistics, GENES, issue 140, pages 83-126.
    18. Pierre Mérel & Matthew Gammans, 2021. "Climate Econometrics: Can the Panel Approach Account for Long‐Run Adaptation?," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(4), pages 1207-1238, August.
    19. Lopez-Uribe, Maria del Pilar & Castells-Quintana, David & McDermott, Thomas K. J., 2017. "Geography, institutions and development: a review ofthe long-run impacts of climate change," LSE Research Online Documents on Economics 65147, London School of Economics and Political Science, LSE Library.
    20. Tamma Carleton & Michael Greenstone, 2021. "Updating the United States Government's Social Cost of Carbon," Working Papers 2021-04, Becker Friedman Institute for Research In Economics.
    21. Njuki, Eric, 2021. "Nonlinear weather and climate-induced effects on hired farm labor wages: Evidence from the U.S. Cornbelt," 2021 Annual Meeting, August 1-3, Austin, Texas 313959, Agricultural and Applied Economics Association.

    More about this item

    JEL classification:

    • 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
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • R59 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Other
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • P20 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:bofitp:bdp2015_027. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/bofitfi.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.