Hot temperatures cool economies and heat up conflicts in poor countries

A new paper by Melissa Dell, Benjamin Jones and Benjamin Olken in the American Economic Journal: Macroeconomics reveals that increases in temperature may have reduced the industrial and agricultural production of developing countries.

The paper examines historical fluctuations in temperature in countries to identify effects on economic outcomes. The researchers found three key results. First, higher temperatures substantially reduce economic growth in poor countries. Second, higher temperatures may reduce growth rates, not just the level of output. Third, higher temperatures have wide-ranging effects, reducing agricultural output, industrial output, and political stability. The authors compared annual temperature and precipitation changes from 1950 to 2003 with aggregate economic output data. Based on the data, the researchers estimated that a one degree Celsius rise in temperature in a given year had reduced economic growth by about 1.3 percentage points on average.

An earlier article by Jones and Olken showed that on average, if a poor country is 1 degree Celsius warmer in a given year the growth of that country’s exports is reduced by between 2.0 and 5.7 percentage points in the same year. By contrast there was no effect on rich countries’ exports.

Fluctuations in weather and climate may also affect social stability and strife. A paper published by Hsiang, Meng and Cane in Nature in August 2011, used data from 1950 to 2004 to show that the probability of new civil conflicts arising throughout the tropics doubles during El Niño years relative to La Niña years. This result, which indicates that ENSO may have had a role in 21% of all civil conflicts since 1950, is the first demonstration that the stability of modern societies relates strongly to the global climate.

References:

Dell. M, Jones..B.F and B. A. Olken. 2012. Temperature Shocks and Economic Growth: Evidence from the Last Half Century. American Economic Journal: Macroeconomics, 4(3): 66–95.DOI:10.1257/mac.4.3.66 http://www.aeaweb.org/articles.php?doi=10.1257/mac.4.3.66

Hsiang. S.M, Meng,K,C. and M A Cane. 2011. Civil conflicts are associated with the global climate. Nature 476, 438-411. DOI:10.1038/nature10311 http://www.nature.com/nature/journal/v476/n7361/full/nature10311.html

Jones.B.F and B.A Olken. 2010. Climate Shocks and Exports. 2010. NBER Working Paper No. 15711.Cambridge, Mass. http://www.nber.org/papers/w15711