The Economic Impact of Weather and Climate

40 Pages Posted: 18 Mar 2021

See all articles by Richard S.J. Tol

Richard S.J. Tol

University of Sussex; Vrije Universiteit Amsterdam; VU University Amsterdam - Institute for Environmental Studies (IVM); Tinbergen Institute; CESifo

Date Written: 2021

Abstract

I propose a new conceptual framework to disentangle the impacts of weather and climate on economic activity and growth: A stochastic frontier model with climate in the production frontier and weather shocks as a source of inefficiency. I test it on a sample of 160 countries over the period 1950-2014. Temperature and rainfall determine production possibilities in both rich and poor countries; positively in cold countries and negatively in hot ones. Weather anomalies reduce inefficiency in rich countries but increase inefficiency in poor and hot countries; and more so in countries with low weather variability. The climate effect is larger that the weather effect.

JEL Classification: D240, O440, O470, Q540

Suggested Citation

Tol, Richard S.J., The Economic Impact of Weather and Climate (2021). CESifo Working Paper No. 8946, Available at SSRN: https://ssrn.com/abstract=3807009

Richard S.J. Tol (Contact Author)

University of Sussex ( email )

Falmer, Brighton BN1 9SL
United Kingdom
1273877282 (Phone)
1273877282 (Fax)

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands

VU University Amsterdam - Institute for Environmental Studies (IVM) ( email )

De Boelelaan 1115
Amsterdam, 1081 HV
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

CESifo ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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