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Expect Above Average Temperatures: Identifying the Economic Impacts of Climate Change

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  • Derek Lemoine

Abstract

A rapidly growing empirical literature seeks to estimate the costs of future climate change from time series variation in weather. I formally analyze the consequences of a change in climate for economic outcomes. I show that those consequences are driven by changes in the distribution of realized weather and by expectations channels that capture how anticipated changes in the distribution of weather affect current and past investments. Studies that rely on time series variation in weather omit the expectations channels. Quantifying the expectations channels requires estimating how forecasts affect outcome variables and simulating how climate change would alter forecasts.

Suggested Citation

  • Derek Lemoine, 2017. "Expect Above Average Temperatures: Identifying the Economic Impacts of Climate Change," NBER Working Papers 23549, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:23549
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    References listed on IDEAS

    as
    1. Deschenes, Olivier, 2014. "Temperature, human health, and adaptation: A review of the empirical literature," Energy Economics, Elsevier, vol. 46(C), pages 606-619.
    2. Ranson, Matthew, 2014. "Crime, weather, and climate change," Journal of Environmental Economics and Management, Elsevier, vol. 67(3), pages 274-302.
    3. repec:eee:jeeman:v:88:y:2018:i:c:p:1-17 is not listed on IDEAS
    4. Maximilian Auffhammer & Anin Aroonruengsawat, 2011. "Simulating the impacts of climate change, prices and population on California’s residential electricity consumption," Climatic Change, Springer, vol. 109(1), pages 191-210, December.
    5. Zhang, Peng & Deschenes, Olivier & Meng, Kyle & Zhang, Junjie, 2018. "Temperature effects on productivity and factor reallocation: Evidence from a half million chinese manufacturing plants," Journal of Environmental Economics and Management, Elsevier, vol. 88(C), pages 1-17.
    6. Alan Barreca & Karen Clay & Olivier Deschenes & Michael Greenstone & Joseph S. Shapiro, 2016. "Adapting to Climate Change: The Remarkable Decline in the US Temperature-Mortality Relationship over the Twentieth Century," Journal of Political Economy, University of Chicago Press, vol. 124(1), pages 105-159.
    7. Wolfram Schlenker & W. Michael Hanemann & Anthony C. Fisher, 2005. "Will U.S. Agriculture Really Benefit from Global Warming? Accounting for Irrigation in the Hedonic Approach," American Economic Review, American Economic Association, vol. 95(1), pages 395-406, March.
    8. Maximilian Auffhammer & Solomon M. Hsiang & Wolfram Schlenker & Adam Sobel, 2013. "Using Weather Data and Climate Model Output in Economic Analyses of Climate Change," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 7(2), pages 181-198, July.
    9. 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.
    10. Kelly, David L. & Kolstad, Charles D. & Mitchell, Glenn T., 2005. "Adjustment costs from environmental change," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 468-495, November.
    11. 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.
    12. Tatyana Deryugina, 2013. "How do people update? The effects of local weather fluctuations on beliefs about global warming," Climatic Change, Springer, vol. 118(2), pages 397-416, May.
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    1. repec:gam:jsusta:v:10:y:2018:i:5:p:1405-:d:144280 is not listed on IDEAS

    More about this item

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • 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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