IDEAS home Printed from https://ideas.repec.org/p/bof/bofitp/2015_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 Economies in Transition.
    • Handle: RePEc:bof:bofitp:2015_027
    as

    Download full text from publisher

    File URL: https://helda.helsinki.fi/bof/bitstream/123456789/13900/1/dp2715%5b1%5d.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. 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.
    4. Ekaterina Zhuravskaya, 2010. "Federalism in Russia," Post-Print halshs-00754793, HAL.
    5. Ismael Sanz & Francisco Javier Velázquez, 2002. "Determinants of the Composition of Government Expenditure by Functions," European Economy Group Working Papers 13, European Economy Group.
    6. 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.
    7. Melecky, Martin & Raddatz, Claudio, 2011. "How do governments respond after catastrophes ? natural-disaster shocks and the fiscal stance," Policy Research Working Paper Series 5564, The World Bank.
    8. 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.
    9. World Bank, 2011. "Russian federation : Social Expenditure and Fiscal Federalism in Russia," World Bank Other Operational Studies 2735, The World Bank.
    10. Merrifield, John, 2000. "State Government Expenditure Determinants and Tax Revenue Determinants Revisited," Public Choice, Springer, vol. 102(1-2), pages 25-50, January.
    11. Shelton, Cameron A., 2007. "The size and composition of government expenditure," Journal of Public Economics, Elsevier, vol. 91(11-12), pages 2230-2260, December.
    12. 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.
    13. Irina Slinko & Ekaterina Zhuravskaya & Evgeny Yakovlev, 2005. "Laws for Sale: Evidence from Russia," American Law and Economics Review, Oxford University Press, vol. 7(1), pages 284-318.
    14. Daniel Osberghaus & Christiane Reif, 2010. "Total Costs and Budgetary Effects of Adaptation to Climate Change: An Assessment for the European Union," CESifo Working Paper Series 3143, CESifo.
    15. 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.
    16. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769, October.
    17. Ouattara, Bazoumana & Strobl, Eric, 2013. "The fiscal implications of hurricane strikes in the Caribbean," Ecological Economics, Elsevier, vol. 85(C), pages 105-115.
    18. Mendelsohn, Robert & Nordhaus, William D & Shaw, Daigee, 1994. "The Impact of Global Warming on Agriculture: A Ricardian Analysis," American Economic Review, American Economic Association, vol. 84(4), pages 753-771, September.
    19. Daniel Osberghaus & Christiane Reif, 2010. "Total Costs and Budgetary Effects of Adaptation to Climate Change: An Assessment for the European Union," CESifo Working Paper Series 3143, CESifo.
    20. Schuknecht, Ludger, 1999. "Fiscal policy cycles and the exchange rate regime in developing countries," European Journal of Political Economy, Elsevier, vol. 15(3), pages 569-580, September.
    21. 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, The World Bank, number 2668, June.
    22. 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.
    23. Solanko, Laura, 2006. "Coping with missing public infrastructure : an analysis of Russian industrial enterprices," BOFIT Discussion Papers 2/2006, Bank of Finland, Institute for Economies in Transition.
    24. 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.
    25. André Schultz & Alexander Libman, 2015. "Is there a local knowledge advantage in federations? Evidence from a natural experiment," Public Choice, Springer, vol. 162(1), pages 25-42, January.
    26. -, 2011. "The economics of climate change in the Caribbean," Sede Subregional de la CEPAL para el Caribe (Estudios e Investigaciones) 38620, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    Full references (including those not matched with items on IDEAS)

    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 - Economic Systems - - Socialist Systems and Transition Economies - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:bof:bofitp:2015_027. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Minna Nyman). General contact details of provider: http://edirc.repec.org/data/bofitfi.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.