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The economic impact of weather and climate

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  • Richard S.J. Tol

    (Department of Economics, University of Sussex, Falmer, United Kingdom)

Abstract

I propose a new conceptual framework to disentangle the impacts of weather and climate on economic activity and growth: A stochastic frontier model with climate in the production frontier and weather shocks as a source of inefficiency. I test it on a sample of 160 countries over the period 1950-2014. Temperature and rainfall determine production possibilities in both rich and poor countries; positively in cold countries and negatively in hot ones. Weather anomalies reduce inefficiency in rich countries but increase inefficiency in poor and hot countries; and more so in countries with low weather variability. The climate effect is larger that the weather effect.

Suggested Citation

  • Richard S.J. Tol, 2021. "The economic impact of weather and climate," Working Paper Series 0521, Department of Economics, University of Sussex Business School.
  • Handle: RePEc:sus:susewp:0521
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    1. Week in review – science edition
      by ? in Climate Etc. on 2021-03-13 02:07:32
    2. New Paper From Richard Tol: The Economic Impact of Weather and Climate
      by ? in Climate Science on 2021-06-14 10:55:58

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    More about this item

    Keywords

    climate change; weather shocks; economic growth; 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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