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Environmental and Resource Economics

, Volume 73, Issue 1, pp 283–305 | Cite as

Weather, Climate and Total Factor Productivity

  • Marco LettaEmail author
  • Richard S. J. Tol
Article

Abstract

Recently it has been hypothesized that climate change will affect total factor productivity growth. Given the importance of TFP for long-run economic growth, if true this would entail a substantial upward revision of current impact estimates. Using macro TFP data from a recently developed dataset in the Penn World Table, we test this hypothesis by directly examining the nature of the relationship between annual temperature shocks and TFP growth rates in the period 1960–2006. The results show a negative relationship only exists in poor countries, where a 1 °C annual increase in temperature decreases TFP growth rates by about 1.1–1.8 percentage points, whereas the impact is indistinguishable from zero in rich countries. Extrapolating from weather to climate, the possibility of dynamic effects of climate change in poor countries increases concerns over the distributional issues of future impacts and, from a policy perspective, restates the case for complementarity between climate policy and poverty reduction.

Keywords

Weather variability Climate change Total factor productivity Economic growth 

JEL Classification

O44 O47 Q54 

Supplementary material

10640_2018_262_MOESM1_ESM.docx (142 kb)
Supplementary material 1 (DOCX 142 kb)

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Copyright information

© Springer Nature B.V. 2018

Authors and Affiliations

  1. 1.Sapienza Università di RomaRomeItaly
  2. 2.University of SussexFalmerUK
  3. 3.Vrije Universiteit, AmsterdamAmsterdamThe Netherlands
  4. 4.Tinbergen InstituteAmsterdamThe Netherlands
  5. 5.CESifoMunichGermany

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