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
@ur momisugly davidmhoffer,
From the perspective of a person who self describes as a conservative leaning libertarian, “The rule of low” seems an apt description of what U.S.A has come to. Very sad, but also very apt.
Higher temperatures are the one problem that renewable energy can readily solve. Solar powered cooling unlike solar heating gives higher output at high demand times. Not only that but reviving absorption refrigeration, which was only killed off by clever commercial manipulation and groundless cleverly safety fears, would make solar cooled air conditioning relatively cheap.
The cost of the disastrous cooling we have here in the UK is far higher than the cost of any remotely plausible amount of temperature rise.
So beginning with economists in developed countries there will be an additional tax on their income which will go to economists in the developing countries to augument their incomes by 1.3%. Then the discussion should move onto how to recompense the developing country’s economists for all the warming that has occurred.
So if we impoverish ourselves first by reducing CO2 emissions, then that would make any warming, for any reason, “worse than we thought”? 🙂
Christian Bultmann says:
August 7, 2012 at 7:55 pm
With the equator principles in place at most of the big investment banks there is little hope for poor nations to ever see economic growth.
____________________________________
Or anyone else who is not first at the trough slurping up the newly printed fiat money.
The US dollar is the world reserve currency, when Bernancke (US FED) doubled the money supply in 2008 he swiped wealth from everyone.
If you wish to understand the economics of today’s world, it is crucial to understand how “Legalized Theft” is accomplished by the world’s Central banks and their partners in crime, the politicians. They use Fractional Reserve Currency and inflation of the money supply. [cue stage left for _jim to defend the bankers]
In another words Banking legislation is designed to protect banks from suffering the consequences of their gambling with other people’s wealth. The US Bailout of AIG is an excellent example. (second link with different info. ) The bankers were protected and US homeowners and tax payers LOST BIG TIME.
It is interesting that David Rockefeller’s tutor at LSE was none other than F. A. Hayek, Mises student, who won the Nobel Prize for economics the year after Mises’s death.
Pretty high endorsement for the Austrian School of Economics.
I suggest reading: Mises on Money: FRACTIONAL RESERVE BANKING
Holy crap. This is what passes for scholarship, these days?
Maybe we ARE doomed!?
these are just some idiot economists
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Gail Combs says:
August 7, 2012 at 5:51 pm
Bill Parsons says:
August 7, 2012 at 4:18 pm
Romney was at the center of this issue recently when he commented that Israelis had succeeded in the Middle East due to their culture….
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I agree with him because that society has always had a high regard for learning and it has paid off in dividends in the science, technology and industry they have brought to their land.
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Gail, just another example of post-modern “progressive” thinking/culture — success is bad, no one is responsible for themselves, playing the victim or race card, etc, etc, etc. What can one do?
acementhead says:
August 7, 2012 at 6:34 pm
That you Alfred?
Plus one internets to the first to solve my simple puzzle.
Prediction: eyesonu will not solve it.
=====================
Cement/concrete weighs from 68 to 200 lbs/cu ft with 68 being light weight and 200 being dense.
Is the puzzle to determine that you, “a cement head”, are dense or just a light weight? Adding rocks to your mix would put you in the dense category while expanding clay would create the light weight category. Are you both dense and light weight? Puzzle solved?
Re: acementhead
Or is the puzzle to try to make any sense of what cement head wrote. That one I could not solve.
“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. ”
Ah,nothing like a bit of spurious correlations. I’m waiting for the statistical study that correlates roosters crowing and sunrises.
Here’s a bit of moving the goal posts,
“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,…To see why, Olken suggests, first think of a dry year for vegetables in your backyard garden.” We’re not talking about precip but temps. The UK is having a very cold but very wet summer. My guess is that the hop yields in Kent will be very poor this year.
I think African economies require that they retire their militaries. They spend disproportionate amounts on a military that is used only to kill and subdue its own citizens. They don’t tend to have much in the way of all out wars with their neighbors. Of course there will be no retiring of the militaries, because it is those in power who use their militaries against there own people. How proud some of these Sandhurst and other European military school graduates must feel after a day of gunning down people in the market places and neighborhoods. I note they all have campaign ribbons, too and probably there are medals for bravery and that sort of thing handed out.
I worked in Nigeria in the middle 60s, a couple of years after independence of much of Africa from its colonial administrations. I was a government officer – geologist-in-charge of a branch office of the Geological Survey of Nigeria, still peopled largely by expatriot geologists. My lofty station gave me administration over a messenger with a bicycle (no telephones) a male clerk-typist and myself as the only geologist (or any other official) in the branch. Nevertheless, this brought me invites to lavish parties and commands to attend formal receptions for heads of state (I use the plural deliberately and the term “heads” seems particularly appropriate). I met several heads of state (all military) after a coup that killed the duly elected first prime minister of the country Alhaji Tafawa Balewa, followed by several coups over the course of a year or two. One command was that I attend at the airport at Jos with a phalanx of other dignitaries to meet General Ironsi, President of the Federal Republic and Commander-in-Chief of the Nigerian Forces (I believe he called himself). Also, I was commanded to attend a formal reception that evening for dinner and drinks. This was a scary day, since Ironsi was a catholic Ibo and they had killed the muslim prime minister and assassinated the Sultan of Sokoto (like killing the Pope). The military honor guard was all muslim and they were nervously clicking their safeties off and on their assault rifles both at the airport and surrounding the evening show. While there, I was introduced and being a mining man, he asked me if I could construct bombs in 45 gallon drums that they could drop from a DC3 in case of an insurrection. Well, I could have with dynamite, and I was his employee, but I said there would need to be a device to set it off on impact. He said he would get back to me. Two weeks later in Ibadan, he had his head of state cut off and a new boss came into the picture some month’s later. I was at least temporarily relieved.
The next day I went to the marketplace to get myself some cigarettes, meat and a few shillingsworth of rice from a cardboard drum that had a label “A gift to the people of Nigeria from Oxfam”. This was the minister of health’s style in distributing the gift. His brother owned a trucking firm and he got the contract to deliver the minister’s rice.
Ladies, gentlemen and economists, the temperature had nothing to do with any of this.
Gary: The Respectable MIT-warmists found this all has to do with
over-warming, the guys were over-warmed and all this misery
happened because they were warmed by an exceeding 1.3 degrees….
The statistics prove it. Good thing, YOU did not overwarm and that
you kept COOL. Keep cool man, not keep overwarm….this is the point
the scientists from MIT make…..
B.S and a crock of doggy dooo. You really can’t blame the poor climate scientists as funding is abundant and they have to write some piece of garbage to justify their pathetic existence.
http://wattsupwiththat.com/2011/04/03/the-big-self-parodying-climate-change-blame-list/
During the Roman Warm Period productivity declined and famine was rampant.
During the Little Ice Age there was a massive boom in agricultural output and food for all.
It’s simple and clear to understand where these people are coming from. Furthermore, C02 is NOT plant food but a deadly toxin. So deadly that greenhouse growers pump in the poison at 1000ppm in order to kill their crops. It all makes complete sense now.
(Do I need to put a sarc tag?)
All hope is lost for Africa after the hottest decade on the global record. Oh noes!!!
Why does the public fund such BS studies trying to link global warming with withering economies??? I repeat, the study is B.S and a crock of horse sh!t
Further references
http://www.economist.com/blogs/dailychart/2011/01/daily_chart
http://www.economist.com/node/21541015
I wonder how the heck some of the warm Asian Tiger economies developed during the period of global warming? From Third World to First World during rising global temperatures. Am I missing something?
Global warming during the ‘hottest’ decade on the record has killed trade with Africa. There is simply no hope left. It’s a terrible shame.
All this disaster and economic calamity during the ‘hottest’ decade on the record. What does global warming really mean for the world’s economies? I’m thinking again about the Asian Tiger economies and their decline during their rise just before the economic global downturn.
I hope this is my last comment here unless a Warmist wishes to back up this crap study.
Jimbo says:
August 8, 2012 at 4:12 pm
I wonder how the heck some of the warm Asian Tiger economies developed during the period of global warming? From Third World to First World during rising global temperatures. Am I missing something?
======================
Tigers, they demand attention.
They can’t be reasoned with.
Our lesson is: Keep COOL and do not OVERWARM….
Some of the criticisms here miss the mark. Just because there isn’t one to one causation (you have coups without bad weather) doesn’t mean something isn’t a causal variable.
There is a slightly larger problem.
If you look at the paper’s last page you see which countries are poor and which are rich.
Rich countries include
China (5400), Jamacia (5562) Albania (4030) Colombia (7067) Iran (4526) Jordan (4666) Guyana (2994)
(numbers are per capita and from wiki, World Bank column with all values from between 2009-2011.)
There are a couple of things to note. First, there are richer “poor” countries like Ecuador (4569). Leaving aside considerations of cherrypicking, it is important to note that the standard for rich is really low.
If rich is just above 5000, then a good portion of poor countries will move into the rich category before the temperature increases.
Lets use a simple example, Bangladesh (using Vietnam would be a bit unfair). It is listed at 735 per capita in 2011 by the world bank.
http://www.thedailystar.net/newDesign/news-details.php?nid=131027
This lists the country’s current growth at 6% (during a global recession), up from the disappointing 4% in the 1980s.
http://www.indexmundi.com/bangladesh/population_growth_rate.html
Pop growth of 1.5
This means the country’s per capita income will double every 16 years and 3 doublings will move it into the rich category- so it will be fine in 48 years. Essentially all poor countries with decent economic growth will quickly climb up into the “rich” category.
Summary
Developing nations will quickly be out of the poor category so this will only be a marginal problem for them. Countries that are suffering from poverty and low growth will be the most affected, mostly because they have little ability to adapt to change. Someone should take a look at how big the temperature effect is on those countries (there should be different reactions to temperature between an economy that is growing (Vietnam) and one that is suffering a civil war (Nepal)).
I just realized my comment was incomplete. I need to give an example with temperature increase.
Lets use middle of the road IPCC estimate (4 C, or 1 C every 25 years). 2012-2028- No temperature effect, economy doubles to 1470. 2028-2047 temperature effect of .65, growth rate 3.85 with doubling time of 18.7 economy at 2940 2047-2075 temperature effect of 1.95 growth rate 2.55 doubling time of 28 economy at 5080.
So it will take Bangladesh 15 more years assuming their per capita growth is a constant 4.5% (it won’t). The faster countries growth or the richer they begin, the smaller the number of years extra it will take. For example if 6% was their per capita growth rate, in normal they would be done by 2048 and long would take until 2052- a difference of just 4 more.
Relax everybody because because the Wizards of Oz are going to save the World single handedly-
http://www.theaustralian.com.au/business/opinion/australia-will-send-57bn-a-year-overseas-by-2050-treasury-modelling-shows/story-e6frg9k6-1226118430293
The computer models all show that this time around the thin air derivatives trading will be different and who could possibly argue with computerised trading programs? For the skeptics among you, please note it’s all been rigorously tested with Microsoft, Mac and Android and it all checks out.
The data is freely downloadable but to interpret it you need to buy Stata software. Stalemate. I’m too lazy to see if my C++ or Pascal interpreters can read it. Anyone?