Does Rainfall Matter for Economic Growth? Evidence from Global Sub-National Data (1990-2014)

22 Pages Posted: 6 Aug 2019

See all articles by Richard Damania

Richard Damania

World Bank; University of Adelaide - School of Economics

Sebastien Desbureaux

World Bank

Esha Dilip Zaveri

World Bank

Date Written: June 17, 2019

Abstract

Much micro-econometric evidence suggests that precipitation has wide ranging impacts on vital economic indicators such as agricultural yields, human capital, and even conflict. And yet paradoxically most macro-econometric evidence (especially in the climate economy literature) finds that precipitation has no robust and significant impact on various measures of aggregate economic output. This paper argues that spatial aggregation of weather at the country level explains this result. The paper uses annual subnational gross domestic product data to show a concave relationship between precipitation and local gross domestic product growth between 1990 and 2014. It then demonstrates that when the data are aggregated at larger spatial scales, the impact decreases and eventually vanishes. The impact of precipitation on aggregate economic activity is predominantly felt in developing countries; it is insignificant in developed countries. Agriculture is found to be the dominant pathway. The results have significant consequences for measuring the economic impacts of climate change.

Suggested Citation

Damania, Richard and Desbureaux, Sebastien and Zaveri, Esha Dilip, Does Rainfall Matter for Economic Growth? Evidence from Global Sub-National Data (1990-2014) (June 17, 2019). World Bank Policy Research Working Paper No. 8888, Available at SSRN: https://ssrn.com/abstract=3430496

Richard Damania (Contact Author)

World Bank ( email )

1818 H Street, N.W.
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University of Adelaide - School of Economics ( email )

Adelaide SA, 5005
Australia
+61 8 8303 4933 (Phone)
+61 8 8223 1460 (Fax)

Sebastien Desbureaux

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Esha Dilip Zaveri

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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