Weather, climate and total factor productivity

Letta, Marco and Tol, Richard (2018) Weather, climate and total factor productivity. Environmental and Resource Economics. ISSN 0924-6460

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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.

Item Type: Article
Schools and Departments: School of Business, Management and Economics > Economics
Subjects: H Social Sciences > HB Economic theory. Demography
Depositing User: Richard Tol
Date Deposited: 13 Jun 2018 08:55
Last Modified: 07 Aug 2018 10:08

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