Climatic Change

, Volume 156, Issue 1–2, pp 209–229 | Cite as

Temperature and production efficiency growth: empirical evidence

  • Surender KumarEmail author
  • Madhu Khanna


This paper examines the marginal effects of temperature on the growth rate and variability in growth rate of total factor productivity (TFP) of a country, as measured by its production efficiency relative to a stochastic frontier. Using panel data for 168 countries for the period 1950–2014 to estimate a one-step stochastic frontier function, we find that temperature has a concave relationship with the growth rate of production efficiency and with the variability in this growth rate. We observe that hotter than the average temperature is not only detrimental to production efficiency growth but also makes the growth less stable than otherwise, and these effects are larger in very hot countries with average annual temperature greater than 25 °C. More importantly, we observe that the detrimental marginal effects of higher temperature depend on the level of economic development of a country; they are larger for poor countries relative to rich countries. Our findings have implications for the specification of climate damage functions in integrated assessment models and estimates of country-specific social cost of carbon.


Temperature Production efficiency growth Stochastic frontier analysis (SFA) Non-linear effects 

JEL classification

E23 O13 Q54 Q56 



We would like to thank Saumya Verma for helping us in drawing the figures. Madhu Khanna gratefully acknowledges support from NIFA, USDA for this research.

Supplementary material

10584_2019_2515_MOESM1_ESM.docx (10.4 mb)
ESM 1 (DOCX 10901 kb)


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Copyright information

© Springer Nature B.V. 2019

Authors and Affiliations

  1. 1.Department of Economics, Delhi School of EconomicsUniversity of DelhiDelhiIndia
  2. 2.Department of Agricultural and Consumer EconomicsUniversity of IllinoisUrbanaUSA

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