Attempts to identify the sources of interaction allow us to conclude that they are due to spillovers that require coordination in expenditure items and to mimicking behaviour possibly to attract households and firms.
JEL: C23, H7, R1
Changes in labour productivity feed through directly to national income. An external shock, like climate change, which may substantially reduce the productivity of workers is therefore a macroeconomic concern. The biophysical impact of higher temperatures on human performance is well documented. Less well understood are the wider effects of higher temperatures on the aggregate productivity of modern, diversified economies, where economic output is produced in contexts ranging from outdoor agriculture to work in air-conditioned buildings. Working conditions are at least to some extent the result of societal choices, which means that the labour productivity effects of heat can be alleviated through careful adaptation. A range of technical, regulatory/infrastructural and behavioural options are available to individuals, businesses and governments. The importance of local contexts prevents a general ranking of the available measures, but many appear cost-effective. Promising options include the optimization of working hours and passive cooling mechanisms. Climate-smart urban planning and adjustments to building design are most suitable to respond to high base temperature, while air conditioning can respond flexibly to short temperature peaks if there is sufficient cheap, reliable and clean electricity.
Key policy insights. The effect of heat stress on labour productivity is a key economic impact of climate change, which could affect national output and workers' income. . Effective adaptation options exist, such as shifting working hours and cool roofs, but they require policy intervention and forward planning. . Strategic interventions, such as climate-smart municipal design, are as important as reactive or project-level adaptations. . Adaptation solutions to heat stress are highly context specific and need to be assessed accordingly. For example, shifting working hours could be an effective way of reducing the effect of peak temperatures, but only if there is sufficient flexibility in working patterns.
Investment in wind power has grown remarkably in the past decades in Portugal. Although economic development is an argument for investment incentive policies, little evidence exists as to their net impact on local-level unemployment. Using a panel of all 278 Portuguese mainland municipalities for the years 1997-2017, we assess the existence, distribution and duration of local level labor impacts of wind power investment. Our results show there are short term effects during the construction phase. We estimate a decrease of 0.05 percentage points in the total unemployment rate for each KW per capita installed. These effects are confined to unskilled labor and male workers. Further analysis of spatial interaction finds positive spatial spillovers for municipalities that are 30km or less away but not farther, implying workers are willing to commute but not migrate. We find no evidence of sustained effects or impact during the operations and maintenance phase, despite both short and long term impacts in municipalities' revenues.
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In the context of an emission trading scheme, we study how uncertainty over environmental policy affects firm investment in low-carbon technologies. We develop a three period sequential model combining the industry and electricity sectors and encompassing both irreversible and reversible investment possibilities for firms. Additionally, we explicitly model policy uncertainty in the regulator's objective function as well as the market interactions giving rise to an endogenous permit price. We find that uncertainty reduces irreversible investment and that the availability of both reversible and irreversible technologies partially eliminates the positive effect of policy uncertainty on reversible technology found in previous literature.JEL classification: D78, D80, L51, Q58
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