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Long-Run Economic Impacts of Climate Volatility

Author

Listed:
  • KuK Mo Jung

    (Department of Economics, Sogang University, Seoul, Korea)

  • Sungwon Lee

    (Department of Economics, Sogang University, Seoul, Korea)

Abstract

We estimate long-run economic impacts of climate volatility by employing a stochastic frontier model where climate volatility is additionally included into the production frontier. Our climate panel dataset covers 157 countries over the period 1950-2014. We finnd that both temperature and precipitation affect production possibilities in a hump-shaped way. Most importantly, temperature volatility turns out to reduce long- term potential output. This negative effect is found to be statistically significant, and various robustness checks, including income as well as temperature heterogeneity across nations, confirm it. We also find short-term weather anomalies, either temperature or precipitation, are found to be insignificant across all specifications. Our findings provide supporting empirical evidence for a growing body of Integrated Assessment Model literature, emphasizing the role of uncertainty about global temperature dynamics.

Suggested Citation

  • KuK Mo Jung & Sungwon Lee, 2025. "Long-Run Economic Impacts of Climate Volatility," Working Papers 2502, Nam Duck-Woo Economic Research Institute, Sogang University (Former Research Institute for Market Economy).
    • Handle: RePEc:sgo:wpaper:2502
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    File URL: https://buly.kr/15Ohvl1
    File Function: First version, 2025
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    More about this item

    Keywords

    climate change; long-term climate volatility; stochastic frontier analysis;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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