Effects of Temperature Shocks on Economic Growth and Welfare in Asia

39 Pages Posted: 8 Jan 2017

See all articles by Minsoo Lee

Minsoo Lee

Asian Development Bank

Mai Lin Villaruel

Asian Development Bank

Raymond Elizarde Gaspar

Asian Development Bank

Date Written: December 14, 2016

Abstract

Using the Burke, Hsiang, and Miguel (2015) framework, we examine the nonlinear response effect of economic growth to historic temperature and precipitation fluctuations. We confirm that aside from the significant effect of rising temperature on agricultural production, industrial production and investment endeavors also serve as other potential channels through which temperature significantly affects overall economic productivity. We find the overall economic productivity of developing Asia to be at least 10% lower by 2100 relative to business as usual. We also empirically analyze policy measures and factors that could help countries mitigate consumption volatility driven by climate change-related events. Consistent with several microlevel findings, financial inclusiveness helps households mitigate consumption volatility amid temperature change. Likewise, government plays a critical role in moderating the negative impact of rising temperature in both output and consumption.

Keywords: climate change, consumption volatility, developing Asia, global warming

JEL Classification: I30, Q54, Q58

Suggested Citation

Lee, Minsoo and Villaruel, Mai Lin and Gaspar, Raymond Elizarde, Effects of Temperature Shocks on Economic Growth and Welfare in Asia (December 14, 2016). Asian Development Bank Economics Working Paper Series No. 501. Available at SSRN: https://ssrn.com/abstract=2894767 or http://dx.doi.org/10.2139/ssrn.2894767

Minsoo Lee (Contact Author)

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Mai Lin Villaruel

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Raymond Elizarde Gaspar

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

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