International Trade and the Transmission of Temperature Shocks

56 Pages Posted: 13 Sep 2022

See all articles by Daniel Osberghaus

Daniel Osberghaus

ZEW – Leibniz Centre for European Economic Research

Oliver Schenker

ZEW – Leibniz Centre for European Economic Research

Date Written: 2022

Abstract

We examine how the adverse impacts of weather shocks are distributed through the trade network. Exploiting a rich, theoretically derived, fixed effects structure, we find significant negative short-run effects of high temperature on exports. A month with an average temperature above 30 °C implies export losses of around three percent. These effects are increasing in the labour-intensity of exports. Using our structural Gravity model, we assess the general equilibrium incidence of these temperature shocks. We find that equilibrium adjustments reduce the economic costs by around 20 percent, but significant costs arise also for countries not directly exposed to high temperatures.

Keywords: International trade, Temperature, Extreme weather, Structural Gravity

JEL Classification: F14, F18, Q54

Suggested Citation

Osberghaus, Daniel and Schenker, Oliver, International Trade and the Transmission of Temperature Shocks (2022). ZEW - Centre for European Economic Research Discussion Paper No. 22-035, Available at SSRN: https://ssrn.com/abstract=4217992 or http://dx.doi.org/10.2139/ssrn.4217992

Daniel Osberghaus (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany
+49-621-1235205 (Phone)

Oliver Schenker

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

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