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Climate Change and Economic Activity: Evidence from U.S. States

Author

Listed:
  • Mohaddes, K.
  • Ng, R. N. C.
  • Pesaran, M. H.
  • Raissi, M.
  • Yang, J-C.

Abstract

We investigate the long-term macroeconomic effects of climate change across 48 U.S. states over the period 1963-2016 using a novel econometric strategy which links deviations of temperature and precipitation (weather) from their long-term moving-average historical norms (climate) to various state-specific economic performance indicators at the aggregate and sectoral levels. We show that climate change has a long-lasting adverse impact on real output in various states and economic sectors, and on labour productivity and employment in the United States. Moreover, in contrast to most cross-country results, our within U.S. estimates tend to be asymmetrical with respect to deviations of climate variables (including precipitation) from their historical norms.

Suggested Citation

  • Mohaddes, K. & Ng, R. N. C. & Pesaran, M. H. & Raissi, M. & Yang, J-C., 2022. "Climate Change and Economic Activity: Evidence from U.S. States," Cambridge Working Papers in Economics 2205, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:2205
    Note: km418, mhp1
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    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. Kahn, Matthew E. & Mohaddes, Kamiar & Ng, Ryan N.C. & Pesaran, M. Hashem & Raissi, Mehdi & Yang, Jui-Chung, 2021. "Long-term macroeconomic effects of climate change: A cross-country analysis," Energy Economics, Elsevier, vol. 104(C).
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    9. 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.
    10. Shardul Agrawala & Maëlis Carraro & Nicholas Kingsmill & Elisa Lanzi & Michael Mullan & Guillaume Prudent-Richard, 2011. "Private Sector Engagement in Adaptation to Climate Change: Approaches to Managing Climate Risks," OECD Environment Working Papers 39, OECD Publishing.
    11. Alexander Chudik & Kamiar Mohaddes & M. Hashem Pesaran & Mehdi Raissi, 2013. "Debt, inflation and growth robust estimation of long-run effects in dynamic panel data models," Globalization Institute Working Papers 162, Federal Reserve Bank of Dallas.
    12. Kalkuhl, Matthias & Wenz, Leonie, 2020. "The impact of climate conditions on economic production. Evidence from a global panel of regions," Journal of Environmental Economics and Management, Elsevier, vol. 103(C).
    13. Marshall Burke & Kyle Emerick, 2016. "Adaptation to Climate Change: Evidence from US Agriculture," American Economic Journal: Economic Policy, American Economic Association, vol. 8(3), pages 106-140, August.
    14. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2012. "Temperature Shocks and Economic Growth: Evidence from the Last Half Century," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(3), pages 66-95, July.
    15. Michele Aquaro & Natalia Bailey & M. Hashem Pesaran, 2021. "Estimation and inference for spatial models with heterogeneous coefficients: An application to US house prices," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 36(1), pages 18-44, January.
    16. Mohaddes, Kamiar & Williams, Rhys J., 2020. "The adaptive investment effect: Evidence from Chinese provinces," Economics Letters, Elsevier, vol. 193(C).
    17. Tatyana Deryugina & Solomon M. Hsiang, 2014. "Does the Environment Still Matter? Daily Temperature and Income in the United States," NBER Working Papers 20750, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Sylvain Leduc & Daniel J. Wilson, 2023. "Climate Change and the Geography of the U.S. Economy," Working Paper Series 2023-17, Federal Reserve Bank of San Francisco.
    2. Emanuele Bacchiocchi & Andrea Bastianin & Graziano Moramarco, 2024. "Macroeconomic Spillovers of Weather Shocks across U.S. States," Working Papers 2024.09, Fondazione Eni Enrico Mattei.
    3. Meierrieks, Daniel & Stadelmann, David, 2024. "Is temperature adversely related to economic development? Evidence on the short-run and the long-run links from sub-national data," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 136, pages 1-18.
    4. Gadea Rivas, María Dolores & Gonzalo, Jesús, 2024. "Regional heterogeneity and warming dominance in the United States," UC3M Working papers. Economics 45017, Universidad Carlos III de Madrid. Departamento de Economía.
    5. Burke, M. & Agarwala, M. & Klusak, P. & Mohaddes, K., 2024. "Climate Policy and Sovereign Debt: The Impact of Transition Scenarios on Sovereign Creditworthiness," Janeway Institute Working Papers 2430, Faculty of Economics, University of Cambridge.
    6. Bo Zhao, 2022. "The Impact of Weather on Local Government Spending," Working Papers 22-22, Federal Reserve Bank of Boston.
    7. Oscar Claveria & Petar Sorić, 2023. "Labour market uncertainty after the irruption of COVID-19," Empirical Economics, Springer, vol. 64(4), pages 1897-1945, April.

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    More about this item

    Keywords

    Climate change; economic growth; adaptation; United States;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • O51 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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