CAMBRIDGE, Mass. — Even temporary rises in local temperatures significantly damage long-term economic growth in the world’s developing nations, according to a new study co-authored by an MIT economist.
Looking at weather data over the last half-century, the study finds that every 1-degree-Celsius increase in a poor country, over the course of a given year, reduces its economic growth by about 1.3 percentage points. However, this only applies to the world’s developing nations; wealthier countries do not appear to be affected by the variations in temperature.
“Higher temperatures lead to substantially lower economic growth in poor countries,” says Ben Olken, a professor of economics at MIT, who helped conduct the research. And while it’s relatively straightforward to see how droughts and hot weather might hurt agriculture, the study indicates that hot spells have much wider economic effects.
“What we’re suggesting is that it’s much broader than [agriculture],” Olken adds. “It affects investment, political stability and industrial output.”
Varied effects on economies
The paper, “Temperature Shocks and Economic Growth: Evidence from the Last Half Century,” was published this summer in the American Economic Journal: Macroeconomics. Along with Olken, the authors are Melissa Dell PhD ’12, of Harvard University, who was a PhD candidate in MIT’s Department of Economics when the paper was produced, and Ben Jones PhD ’03, an economist at Northwestern University.
The study first gained public attention as a working paper in 2008. It collects temperature and economic-output data for each country in the world, in every year from 1950 through 2003, and analyzes the relationship between them. “We couldn’t believe no one had done it before, but we weren’t really sure we’d find anything at all,” Olken says.
By looking at economic data by type of activity, not just aggregate output, the researchers concluded there are a variety of “channels” through which weather shocks hurt economic production — by slowing down workers, commerce, and perhaps even capital investment.
“If you think about people working in factories on a 105-degree day with no air conditioning, you can see how it makes a difference,” Olken says.
One consequence of this, borne out in the data, is that the higher temperatures in a given year affect not only a country’s economic activity at the time, but its growth prospects far into the future; by the numbers, growth lagged following hot years.
To see why, Olken suggests, first think of a dry year for vegetables in your backyard garden: The bad weather would hurt the plants, but if the weather is reasonable the following year, the backyard crop would return to its normal level. Now contrast that with problems that affect, say, industrial and technological development, and capital investment; temperature shocks limiting those activities can compound over time.
“If you think about economic growth, you build on where you were last year,” Olken explains. For longer-term industrial or technological projects, he adds, “If it’s that kind of activity that’s lost, then it affects the country’s long-run growth rate, [and it’s] not a one-off hit.”
Political change in the weather
Olken, Dell and Jones also integrated data about forms of government into the study, and found that temperature shocks are associated with an increase in political instability. A 1-degree-Celsius rise in a given year, they found, raises the probability of “irregular leader transitions,” such as coups, by 3.1 percentage points in poor countries. In turn, the authors write, “poor economic performance and political instability are likely mutually reinforcing.”
Olivier Deschenes, an economist at the University of California at Santa Barbara, calls the study “an important finding because most of the prior research on the economic impacts of climate change have focused on a few sectors of the economy, predominantly the agricultural sector.” By contrast, he notes, the broader finding of the current paper matters “because the growth rate is a key measure of the economic success of a nation and the standard of living of its population.”
Deschenes, who also conducts research on the economic and health effects of temperature changes, suggests that the “next step” for scholars “is to identify adaptation strategies that can moderate the negative impacts of global climate change in the coming decades.”
As Olken observes, the study does not try to account for all the possible problems that could be generated by long-term climate change, such as rising oceans, floods or increased storms. Still, he adds, the paper does suggest some general points about the economic impact of a warming atmosphere. It is vital, he says, to “think about the heterogeneity of the impact between the poor and rich countries” when leaders and policymakers map out the problems the world may confront in the future.
“The impacts of these things are going to be worse for the countries that have the least ability to adapt to it,” he adds. “[We] want to think that through for the implications for future inequality. It’s a double whammy.”
Written by: Peter Dizikes, MIT News Office
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“If you think about people working in factories on a 105-degree day with no air conditioning, you can see how it makes a difference,” Olken says.”
All the more reason to have cheap reliable electricity. Having expensive unreliable electricity does not make the temperature decrease.
Beware of adaptation strategies such as UN-orchastrated wealth transfer schemes and carbon market reallocations of wealth and industry. see Maldives
“A 1-degree-Celsius rise in a given year, they found, raises the probability of “irregular leader transitions,” such as coups, by 3.1 percentage points in poor countries.”
I am calling BS on this one for a start. Impossible to draw a causation from this.
Gore Vidal was right: “The United States of Amnesia.”
“He who joyfully marches to music in rank and file has already earned my contempt. He has been given a large brain by mistake, since for him the spinal cord would surely suffice.”
Albert Einstein
“If you think about people working in factories on a 105-degree day with no air conditioning, you can see how it makes a difference,” Olken says.
As opposed to the dramatically increased output when it is only 104?
Hogwash. There are millions of things that go into the workings of an economy and temperature changes in the tenths of degrees doesn’t even figure into it. They may have found a correlation, but I’ll bet the statistical model presupposed the conclusion then found it. Causation is probably not even indicated, but I won’t waste my time reading the whole paper, the press release pretty much discredited it as poppycock.
I’d worry we are going to have a period of cold and fall back into an ice age more than leaving an ice age. Biodiversity has always been greater in climate optimums and the golden ages of the past civilizations all occurred during the warmest periods of the Holocene. They need to look at history, archaeology and geology if they want to see the “economic effects of climate change”!
What utter rubbish. That’s it – I want a gubment grant to study the effects of fly farts on the atmosphere. My results would have about the same impact as this kind of nonsense.
It is quite obvious from this study that, since we can’t change the weather, that the poor countries would benefit mostly from having access to low cost energy to prosper to the conditions we have had benefit from.
So the solution seems obvious, get those third world countries up to first world energy standards. Cheap electricity, inexpensive power, would eliminate the impact they are predicting…
“this only applies to the world’s developing nations; wealthier countries do not appear to be affected by the variations in temperature.”
So instead of making power more expensive and difficult to manage, let’s get them up a standard of reliable, inexpensive power. Problem solved!
Considering human behavior, I find it highly unlikely that there’s anything like a linear relationship between temperature and economic output. Are the authors really trying to tell us that workers in an un-air-conditioned factory will produce 1.3% less, in general, on a 105 F day than on a 104 F day? Or on an 80 F day than on a 79 F day? Or would the output curve really be relatively flat from say, room temperature to 90 F, then a very steep drop in productivity up to maybe 100 F, then mostly flat again up to where people burst into flames at their workstations?
How about a similar study in cold? Fifteen degrees above room temperature is 87 F; fifteen degrees below is 57 F. Which would you rather work in?
Studies like this fly in the face of common sense. Canada’s growing season has lengthened with warmer temperatures, enabling them to grow more cash crops over larger areas.This results in a boost to GDP. Not to mention reduced heating costs in the winter (assuming that winter months are also warming).
Climate change of any kind will create winners and losers. The idea that the earth’s climate system has some sort of ideal state is a bunch of BS.
I watched an interview with a UK beekeeper on Sky two days back. He was bewailing the miserable summer in that country. His point was that, unless things hot up a bit in the UK, they will have to feed their bees sugar water so as to preserve their hives through the coming winter.
So are they claiming the Libyans kicked out Gaddafi because of climate change now?
Hilarious…
I’ve often wondered whether northern Eurpoean countries have factored rising temperatures into their future CO2 emissions projections. One of the largest uses of energy in this part of the world is heating buildings during the winter, so rising winter temperatures would automatically reduce the countries’ CO2 emissions significantly. If the targets were set with the expectation of such reductions, the recent lack of warming would be quite a blow to the chances of meeting the targets.
Does anyone know more?
Even temporary rises in local temperatures significantly damage long-term economic growth in the world’s developing nations, according to a new study co-authored by an MIT economist.
Replace ‘rises’ with ‘lowerings’ and it means the same damn thing. How about an early frost, and losing a year of crops, that will have a long-term impact. More anti-climatic, mindless gibberish.
I cannot understand why we pay for such junk research. No one likes to work when it is too hot..gee whiz productivity declines.. no one likes to work when it is too cold… gee whiz productivity declines…and some of those folks just don’t like to work!
And of course: “The impacts of these things are going to be worse for the countries that have the least ability to adapt to it,” he adds. “[We] want to think that through for the implications for future inequality. It’s a double whammy.”
Double whammy???
NASA already did a study on temperature and how it affects productivity in the cockpit. Applicable to any work place…its a no brainer. Sorry I can’t provide the paper. Call your library research desk.
Sorry my BS meter is exploding!! How about a study on the econmic costs of cooler temperatures. I’ll bet it’s wayyyyyyyy higher.
Usual GW tripe.
Economic activity, presumably largely driven by agricultural output, reduces for every 1C increase in temperature.
Let’s see. Let’s choose a different start time. Let’s choose the end of the last glacial period.
Is he really going to argue that the potential agricutural output of the world has reduced for each 1C increase in temperatures since then? How about from the middle of the Little Ice Age?
Absolutely ludicrous. Pick a pont, pick your own parameters and keep looking until you see something that appears to confirm your prexisting conclusion.
That is GW science for you.
Alan
Given the political nature of these countries, any correlation is possible. It is all statistically meaningless.
Ah yes, the dismal science, well at least as the Keysians, and econometricians are concerned. Ceteris paribus… but they don’t, not even remotely. Von Mises treatis was called “Human Action” for a reason.
As the Left continues to try to extinguish the light of knowledge..
Couple of questions occur to me:
How accurate is the temp data they are using?
How were they able to distinguish between the economic effect of temp changes and other factors like political unrest, world economy, cost of energy, etc.
Not sure I agree that small increases in temp have any economic effect at all. I doubt that factory worker output is any different at 39C than it was at 38C.
Find ripostes to any economic argument here: http://netec.wustl.edu/JokEc.html
If proof was needed that that there are simply far too many professors in academia, this would be another fine example.
If this drivel was paid for by weight, instead of word count, it’s true value could be determined.
The American South emerged from its relative economic backwardness only after electrification (in part through Tennessee Valley Authority projects begun during FDR’s presidency) and, later, the widespread adoption of air conditioning. Cheap electricity is equally important to developing nations.
Since Stalin and Hitler were from cold countries…