Labor Disutility in a Warmer World: The Impact of Climate Change on the Global Workforce

96 Pages Posted: 28 Sep 2022

See all articles by Ashwin Rode

Ashwin Rode

University of Chicago - Department of Economics

Rachel E. Baker

Princeton University

Tamma Carleton

University of Chicago

Anthony D'Agostino

Mathematica

Michael Delgado

Rhodium Group

Timothy Foreman

King's College London; RFF-CMCC European Institute on Economics and the Environment

Diana R. Gergel

Rhodium Group

Michael Greenstone

University of Chicago - Department of Economics; Becker Friedman Institute for Economics; National Bureau of Economic Research (NBER)

Trevor Houser

Rhodium Group

Solomon Hsiang

University of California, Berkeley; National Bureau of Economic Research

Andrew Hultgren

University of Illinois Urbana-Champaign -- Department of Agricultural and Consumer Economics

Amir Jina

Harris Public Policy, University of Chicago ; National Bureau of Economic Research (NBER)

Robert E. Kopp

Rutgers, The State University of New Jersey - New Brunswick/Piscataway

Steven B. Malevich

Rhodium Group

Kelly E. McCusker

Rhodium Group

Ishan Nath

University of Chicago - Department of Economics

Matthew Pecenco

University of California, Berkeley - University of California, Berkeley

James Rising

London School of Economics & Political Science (LSE) - Grantham Research Institute on Climate Change and the Environment

Jiacan Yuan

Rutgers, The State University of New Jersey - Department of Earth and Planetary Sciences

Date Written: September 16, 2022

Abstract

This paper develops the first globally comprehensive and empirically grounded estimates of worker disutility due to future temperature increases caused by climate change. Harmonizing daily worker-level data from seven countries representing nearly a third of the world's population, we first evaluate the causal effect of daily temperature on labor supply, recovering an inverted U-shaped relationship where extreme cold and hot temperatures lead to labor supply losses for workers in weather-exposed industries. We then develop the first micro-founded, global estimates for how future climate change will impact workers, accounting for expected shifts in the global workforce towards less weather-exposed industries. Interpreting labor supply impacts of climate change through a simple theoretical framework, we monetize the implied disutility to workers of a warmer climate, a welfare cost not captured in any existing estimates. Under a high emissions scenario, we estimate the increase in labor disutility is valued at roughly 1.8% of global GDP in 2099, with damages being especially large in today’s poor and/or hot locations while cold locations benefit. Finally, we estimate that the release of an additional ton of CO2 today will cause expected labor disutility damages of $17.0 under a high emissions scenario and $10.8 under a moderate scenario, using a 2% discount rate that is justified by US Treasury rates over the last two decades. Accounting for uncertainty in these marginal damages when individuals are risk averse increases their value by 31% (high emissions scenario) and 62% (moderate scenario) under a standard parameterization of the utility function.

Suggested Citation

Rode, Ashwin and Baker, Rachel E. and Carleton, Tamma and D'Agostino, Anthony and Delgado, Michael and Foreman, Timothy and Gergel, Diana R. and Greenstone, Michael and Houser, Trevor and Hsiang, Solomon and Hultgren, Andrew and Jina, Amir and Kopp, Robert E. and Malevich, Steven B. and McCusker, Kelly and Nath, Ishan and Pecenco, Matthew and Rising, James and Yuan, Jiacan, Labor Disutility in a Warmer World: The Impact of Climate Change on the Global Workforce (September 16, 2022). Available at SSRN: https://ssrn.com/abstract=4221478 or http://dx.doi.org/10.2139/ssrn.4221478

Ashwin Rode (Contact Author)

University of Chicago - Department of Economics ( email )

1101 East 58th Street
Chicago, IL 60637
United States

Rachel E. Baker

Princeton University

Tamma Carleton

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States
7737026763 (Phone)

Anthony D'Agostino

Mathematica ( email )

P.O. Box 2393
Princeton, NJ 08543-2393
United States

HOME PAGE: http://www.mathematica-mpr.com

Michael Delgado

Rhodium Group ( email )

5 Columbus Circle
New York City, NY
United States

Timothy Foreman

King's College London ( email )

150 Stamford Street
London, SE1 9NH
United Kingdom

RFF-CMCC European Institute on Economics and the Environment ( email )

Via Bergognone, 34
Milan, 20144
Italy

Diana R. Gergel

Rhodium Group

Michael Greenstone

University of Chicago - Department of Economics

1126 East 59th Street
Chicago, IL 60637
United States

Becker Friedman Institute for Economics ( email )

Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Trevor Houser

Rhodium Group ( email )

5 Columbus Circle
New York City, NY
United States

Solomon Hsiang

University of California, Berkeley ( email )

2607 Hearst Avenue
Berkeley, CA 94720-7320
United States

HOME PAGE: http://gspp.berkeley.edu/directories/faculty/solomon-hsiang

National Bureau of Economic Research ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Andrew Hultgren

University of Illinois Urbana-Champaign -- Department of Agricultural and Consumer Economics ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

Amir Jina

Harris Public Policy, University of Chicago ( email )

1155 East 60th Street
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Robert E. Kopp

Rutgers, The State University of New Jersey - New Brunswick/Piscataway ( email )

HOME PAGE: http://www.bobkopp.net/

Steven B. Malevich

Rhodium Group

Kelly McCusker

Rhodium Group ( email )

5 Columbus Circle
New York City, NY
United States

Ishan Nath

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

Matthew Pecenco

University of California, Berkeley - University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

James Rising

London School of Economics & Political Science (LSE) - Grantham Research Institute on Climate Change and the Environment ( email )

Houghton Street
London, WC2A 2AE
Great Britain

HOME PAGE: http://existencia.org/pro

Jiacan Yuan

Rutgers, The State University of New Jersey - Department of Earth and Planetary Sciences ( email )

Wright-Rieman Laboratories
Busch Campus, 610 Taylor Rd.
Piscataway, NJ 08854-8066
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
70
Abstract Views
244
rank
467,015
PlumX Metrics