Seminar – Long Term Macroeconomic Effects of Climate Change: A Cross Country Analysis

Dr Kamiar Mohaddes, Cambridge Judge Business School

We study the long term impact of climate change on economic activity across countries, using a stochastic growth model where labour productivity is affected by country-specific climate variables defined as deviations of temperature and precipitation from their historical norms. Using a panel data set of 174 countries over the years 1960 to 2014, we find that per capita real output growth is adversely affected by persistent changes in the temperature above or below its historical norm, but we do not obtain any statistically significant effects for changes in precipitation. Our counterfactual analysis suggests that a persistent increase in average global temperature by 0.04 degrees centigrade per year, in the absence of mitigation policies, reduces world real GDP per capita by more than seven per cent by 2100. On the other hand, abiding by the Paris Agreement, thereby limiting the temperature increase to 0.01 degrees centigrade per annum, reduces the loss substantially to about one per cent. These effects vary significantly across countries depending on the pace of temperature increases and variability of climate conditions. We also provide supplementary evidence using data on a sample of 48 US states between 1963 and 2016, and show that climate change has a long-lasting adverse impact on real output in various states and economic sectors, and on labour productivity and employment.

Speaker bio

Kamiar Mohaddes is an economist at Cambridge Judge Business School at the University of Cambridge and a Fellow in Economics at Girton College, University of Cambridge. He is an Economic Research Forum (ERF) Research Fellow and serves as its Thematic Co-Leader for the macroeconomics theme. His main areas of research are applied macroeconomics, global and national macro-econometric modelling, energy economics, and climate change. His articles have been published in a number of edited volumes (Cambridge University Press, Oxford University Press, and Routledge) as well as in leading journals, including the Journal of Applied Econometrics, Journal of International Economics, and the Review of Economics and Statistics. His research has also been covered in major international news outlets including the BBC, Bloomberg, The Economist, the Financial Times, Reuters, The Wall Street Journal, and The Washington Post. He holds a PhD in Economics from the University of Cambridge.