Econ Seminar: David Stadelmann (University of Bayreuth)

https://sabanciuniv.zoom.us/j/91383976765

"Is temperature inversely related to economic development? Evidence on the short-run and the long-run links from sub-national data "
We examine the effect of rising temperatures on regional economic development, using annual sub-national data for over 1,500 regions in 155 countries between 1990 and 2017. In a panel setting with region- and country-time fixed effects, we find no evidence of a homogeneous or heterogeneous effect of rising temperatures on economic development as measured by regional per capita income. Additionally, no non-linear relationship between temperature and economic development is found. We also employ a long-difference approach that is attuned to exploring the long-run relationship between rising temperatures and regional income. Results indicate that rising temperatures have a negative impact on regional per capita income for a minority of regions located in countries with weak economic, legal, and political institutions in the long run. Furthermore, these vulnerable regions experience a decline in long-term population and human capital development. The use of alternative regional per capita GDP data from 1950 onwards confirms these conclusions. Our results suggest that the negative economic effects of temperature increase with time, only becoming apparent in the long run for regions in already disadvantaged countries. Thus, country-specific conditions moderate regional economic vulnerability to future temperature increases due to global climate change.