Temperature and Growth: A Panel Analysis of the United States

I had earlier blogged about how hot areas potentially lead to lower human capital formation in India.

Now this research piece says how higher temperatures lead to lower growth in US States:

We document that seasonal temperatures have significant and systematic effects on the U.S. economy, both at the aggregate level and across a wide cross-section of economic sectors. This effect is particularly strong for the summer: a 1 degree F increase in the average summer temperature is associated with a reduction in the annual growth rate of state-level output of 0.15 to 0.25 percentage points. We combine our estimates with projected increases in seasonal temperatures and find that rising temperatures could reduce U.S. economic growth by up to one-third over the next century.

The authors say the growth decline via labor productivity as seen in India study:

We document that temperature may affect economic activities through its impact on labor productivity. In our empirical analysis, an increase in the average summer temperature decreases the annual growth rate of labor productivity, while an increase in the average fall temperature has the opposite effect. While our finding sheds light on the effects of temperature on labor productivity at the macroeconomic level, it is also consistent with existing studies of this relationship at the microeconomic level. For example, Zivin and Neidell (2014) have found that warmer temperatures reduce labor supply in the U.S., and Cachon, Gallino and Olivares (2012) have documented that high temperatures decrease productivity and performance.

Hmm.
Some regions have always been hotter but the diminishing green cover is making things even worse. One could manage the heat earlier but now without much shade in most regions, it is becoming more unmanageable. There is a reason why Sumita Kale has been asking people and authorities in Pune to seriously focus on the diminishing green cover in the city.

One Response to “Temperature and Growth: A Panel Analysis of the United States”

  1. Anantha Nageswaran Says:

    I do not know if you saw this:

    https://www.firstpost.com/living/heat-waves-in-india-a-scorching-indication-of-where-inaction-on-climate-change-crisis-will-lead-4458745.html

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