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Weather, climate and total factor productivity

Author

Listed:
  • Marco Letta

    (Sapienza Università di Roma)

  • Richard S.J. Tol

    (University of Sussex
    Vrije Universiteit Amsterdam
    Tinbergen Institute
    CESifo)

Abstract

Recently it has been hypothesized that climate change will affect total factor productivity growth. Given the importance of TFP for long-run economic growth, if true this would entail a substantial upward revision of current impact estimates. Using macro TFP data from a recently developed dataset in Penn World Tables, we test this hypothesis by directly examining the nature of the relationship between annual temperature shocks and TFP growth rates in the last decades. The results show a negative relationship only in poor countries. While statistically significant, the estimate upper bound is a reduction of TFP growth is less than 0.1%, i.e., climate change will decelerate but not reverse economic growth. This finding increases concerns over the distributional issues of future impacts, and restates the case for complementarity between climate policy and poverty reduction.

Suggested Citation

  • Marco Letta & Richard S.J. Tol, 2016. "Weather, climate and total factor productivity," Working Paper Series 10216, Department of Economics, University of Sussex Business School.
  • Handle: RePEc:sus:susewp:10216
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    More about this item

    Keywords

    weather variability; climate change; total factor productivity; economic growth;
    All these keywords.

    JEL classification:

    • 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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