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Going NUTS: The regional impact of extreme climate events over the medium term

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  • Usman, Sehrish
  • González-Torres Fernández, Guzmán
  • Parker, Miles

Abstract

The projected increase in extreme climate events in the coming decades is likely to exacerbate the existing productivity and demographic challenges facing Europe. We study the dynamic, medium-run macroeconomic effects of heatwaves, droughts and floods in 1160 EU regions through the lens of a local projections, difference in difference framework. These events reduce output not only on impact but also into the medium term. Output is 1.5 percentage points lower two years after a summer heatwave, 3 percentage points lower four years after a drought and 2.8 percentage points lower four years after a flood. Both lower regional population and lower labour productivity per hour worked contribute to the medium-term decline.

Suggested Citation

  • Usman, Sehrish & González-Torres Fernández, Guzmán & Parker, Miles, 2025. "Going NUTS: The regional impact of extreme climate events over the medium term," European Economic Review, Elsevier, vol. 178(C).
    • Handle: RePEc:eee:eecrev:v:178:y:2025:i:c:s001429212500131x
    DOI: 10.1016/j.euroecorev.2025.105081
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    Cited by:

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    2. Martin Bruns & Helmut Lütkepohl, 2026. "Review of Proxy Vector Autoregressive Analysis," Discussion Papers of DIW Berlin 2155, DIW Berlin, German Institute for Economic Research.
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    Keywords

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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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