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Day-to-day temperature variability reduces economic growth

Author

Listed:
  • Maximilian Kotz

    (Potsdam Institute for Climate Impact Research
    Potsdam University)

  • Leonie Wenz

    (Potsdam Institute for Climate Impact Research
    Mercator Research Institute on Global Commons and Climate Change
    University of California)

  • Annika Stechemesser

    (Potsdam Institute for Climate Impact Research
    Potsdam University)

  • Matthias Kalkuhl

    (Mercator Research Institute on Global Commons and Climate Change
    Potsdam University)

  • Anders Levermann

    (Potsdam Institute for Climate Impact Research
    Potsdam University
    Columbia University)

Abstract

Elevated annual average temperature has been found to impact macro-economic growth. However, various fundamental elements of the economy are affected by deviations of daily temperature from seasonal expectations which are not well reflected in annual averages. Here we show that increases in seasonally adjusted day-to-day temperature variability reduce macro-economic growth independent of and in addition to changes in annual average temperature. Combining observed day-to-day temperature variability with subnational economic data for 1,537 regions worldwide over 40 years in fixed-effects panel models, we find that an extra degree of variability results in a five percentage-point reduction in regional growth rates on average. The impact of day-to-day variability is modulated by seasonal temperature difference and income, resulting in highest vulnerability in low-latitude, low-income regions (12 percentage-point reduction). These findings illuminate a new, global-impact channel in the climate–economy relationship that demands a more comprehensive assessment in both climate and integrated assessment models.

Suggested Citation

  • Maximilian Kotz & Leonie Wenz & Annika Stechemesser & Matthias Kalkuhl & Anders Levermann, 2021. "Day-to-day temperature variability reduces economic growth," Nature Climate Change, Nature, vol. 11(4), pages 319-325, April.
    • Handle: RePEc:nat:natcli:v:11:y:2021:i:4:d:10.1038_s41558-020-00985-5
    DOI: 10.1038/s41558-020-00985-5
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    Citations

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    Cited by:

    1. Zhou, Mengling & Jiang, Kangqi & Chen, Zhongfei, 2022. "Temperature and corporate risk taking in China," Finance Research Letters, Elsevier, vol. 48(C).
    2. Dang, Hai-Anh H. & Trinh, Trong-Anh, 2022. "Does Hotter Temperature Increase Poverty? Global Evidence from Subnational Data Analysis," GLO Discussion Paper Series 1124, Global Labor Organization (GLO).
    3. Patrycja Klusak & Matthew Agarwala & Matt Burke & Moritz Kraemer & Kamiar Mohaddes, 2023. "Rising Temperatures, Falling Ratings: The Effect of Climate Change on Sovereign Creditworthiness," Management Science, INFORMS, vol. 69(12), pages 7468-7491, December.
    4. Chang, Jun-Jie & Mi, Zhifu & Wei, Yi-Ming, 2023. "Temperature and GDP: A review of climate econometrics analysis," Structural Change and Economic Dynamics, Elsevier, vol. 66(C), pages 383-392.
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    6. Agarwala, Matthew & Burke, Matt & Klusak, Patrycja & Mohaddes, Kamiar & Volz, Ulrich & Zenghelis, Dimitri, 2021. "Climate Change And Fiscal Sustainability: Risks And Opportunities," National Institute Economic Review, National Institute of Economic and Social Research, vol. 258, pages 28-46, November.
    7. Kotz, Maximilian & Kuik, Friderike & Lis, Eliza & Nickel, Christiane, 2023. "The impact of global warming on inflation: averages, seasonality and extremes," Working Paper Series 2821, European Central Bank.
    8. Linsenmeier, Manuel, 2021. "Temperature variability and long-run economic development," SocArXiv xvucn, Center for Open Science.
    9. Ciccarelli, Matteo & Kuik, Friderike & Martínez Hernández, Catalina, 2023. "The asymmetric effects of weather shocks on euro area inflation," Working Paper Series 2798, European Central Bank.
    10. Sheng, Xin & Gupta, Rangan & Cepni, Oguzhan, 2022. "Persistence of state-level uncertainty of the United States: The role of climate risks," Economics Letters, Elsevier, vol. 215(C).
    11. Donato Masciandaro & Riccardo Russo, 2022. "Central Banks and Climate Policy: Unpleasant Trade–Offs? A Principal–Agent Approach," BAFFI CAREFIN Working Papers 22181, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    12. Christian Fries & Lennart Quante, 2023. "Intergenerational Equity in Models of Climate Change Mitigation: Stochastic Interest Rates introduce Adverse Effects, but (Non-linear) Funding Costs can Improve Intergenerational Equity," Papers 2309.16186, arXiv.org, revised Sep 2023.
    13. Montrone, Lorenzo & Steckel, Jan Christoph & Kalkuhl, Matthias, 2022. "The type of power capacity matters for economic development – Evidence from a global panel," Resource and Energy Economics, Elsevier, vol. 69(C).
    14. Sheng, Xin & Gupta, Rangan & Çepni, Oğuzhan, 2022. "The effects of climate risks on economic activity in a panel of US states: The role of uncertainty," Economics Letters, Elsevier, vol. 213(C).
    15. Jun Ge & Qi Liu & Beilei Zan & Zhiqiang Lin & Sha Lu & Bo Qiu & Weidong Guo, 2022. "Deforestation intensifies daily temperature variability in the northern extratropics," Nature Communications, Nature, vol. 13(1), pages 1-15, December.
    16. Natoli, Filippo, 2022. "Temperature surprise shocks," MPRA Paper 112568, University Library of Munich, Germany.
    17. Donato Masciandaro & Romano Vincenzo Tarsia, 2021. "Society, Politicians, Climate Change and Central Banks: An Index of Green Activism," BAFFI CAREFIN Working Papers 21167, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    18. Christian P. Fries & Lennart Quante, 2023. "Accounting for Financing Risks improves Intergenerational Equity of Climate Change Mitigation," Papers 2312.07614, arXiv.org.
    19. Matthew Agarwala & Matt Burke & Patrycja Klusak & Kamiar Mohaddes & Ulrich Volz & Dimitri Zenghelis, 2021. "Climate Change and Fiscal Responsibility: Risks and Opportunities," Working Papers 008, The Productivity Institute.
    20. Shu Liu & Yong Wang & Guang J. Zhang & Linyi Wei & Bin Wang & Le Yu, 2022. "Contrasting influences of biogeophysical and biogeochemical impacts of historical land use on global economic inequality," Nature Communications, Nature, vol. 13(1), pages 1-14, December.
    21. Donato Masciandaro & Romano Vincenzo Tarsia, 2021. "Society, Politicians, Climate Change and Central Banks: An Index of Green Activism," BAFFI CAREFIN Working Papers 21167, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    22. Linsenmeier, Manuel, 2023. "Temperature variability and long-run economic development," LSE Research Online Documents on Economics 119485, London School of Economics and Political Science, LSE Library.
    23. Filippo Natoli, 2023. "The macroeconomic effects of temperature surprise shocks," Temi di discussione (Economic working papers) 1407, Bank of Italy, Economic Research and International Relations Area.

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