The Effects of Weather Shocks on Economic Activity: What are the Channels of Impact?

Abstract

Global temperatures have increased at an unprecedented pace in the past 40 years. This paper finds that increases in temperature have uneven macroeconomic effects, with adverse consequences concentrated in countries with hot climates, such as most low-income countries. In these countries, a rise in temperature lowers per capita output, in both the short and medium term, through a wide array of channels: reduced agricultural output, suppressed productivity of workers exposed to heat, slower investment, and poorer health. In an unmitigated climate change scenario, and under very conservative assumptions, model simulations suggest the projected rise in temperature would imply a loss of around 9 percent of output for a representative low-income country by 2100.

Macro Analysis of Climate Change and Agricultural Production in Myanmar

“…The result is the same with the finding of Lesk et al 2016 that drought and extreme temperature adversely affected on production of agriculture across the world and also greater impact on production of cereal crops [40]; and finding of You L et al 2009 who found that in term of cereal crops, the higher temperature can negatively effect on cereal production, reflecting a 1°C increase in temperature in the growing period may decrease production of wheat by about 3-10% [41]. The result is also consistent with the finding of [42,43] in which higher temperatures may have negative impact on aggregate output. An increase in temperature-related extreme weather events have an association with reduction in production of crops in Myanmar.…”

Productive Capacities, Economic Growth and Economic Growth Volatility in Developing Countries: Does Structural Economic Vulnerability Matter?

“…Other studies (e.g., Antonakakis and Badinger, 2016;Berg et al, 2011;Dabla-Norris and Gündüz, 2014;Junior et al, 2021;Loayza et al, 2007) have reported negative effects of adverse shocks on economic growth. Additionally, weather shocks and natural disasters (including severe ones) can adversely affect economic growth, through inter alia, lower investment, lower labor productivity, poorer human health, and lower agricultural and industrial output (e.g., Acevedo et al, 2020;Alba et al, 2011;Fomby et al, 2013;Gavin and Hausmann, 1998;Kalkuhl and Wenz, 2020;Klomp and Valckx, 2014;Loayza et al, 2012). Nevertheless, moderate disasters (such as moderate floods) can have a positive economic growth effect in some sectors (see Fomby et al, 2013;Loayza et al, 2012).…”

Winter weather and work hours: Heterogeneous effects and regional adaptation

“…The authors do not include damages due to extreme weather events. Using a dataset from more than 180 economies over the period 1950–2015, Acevedo et al (2020) examine how economic activity is affected by annual variation in temperature and precipitation. The authors conclude that increases in average annual temperatures are followed by lower future levels of investment, which in turn leads to lower output.…”