The Effects of Climate and Weather on Economic Output: Evidence from Global Subnational Data

TL;DR

This study uses global subnational data and panel models to show that weather shocks temporarily affect economic output, with significant short-term impacts especially in extreme climates, but negligible long-term effects.

Contribution

It provides robust empirical evidence on the transient effects of weather shocks on economic output using comprehensive global subnational data.

Findings

Weather shocks have a significant short-term impact on economic output.

Long-term effects of weather shocks are statistically insignificant in most regions.

Extreme climates experience more pronounced long-term effects.

Abstract

Estimating the effects of climate on economic output is crucial for formulating climate policy, but current empirical findings remain ambiguous. Using annual panel model and panel long-difference model with global subnational data from nearly all countries, we find robust evidence that weather shocks have a transient effect on output. The impact on economic growth is large and significant in the short-run but statistically insignificant in the long-run, except in the coldest and hottest places.