The Impact of Climate on the Production of Economic Sectors

27 Pages Posted: 19 Jan 2023 Last revised: 14 Apr 2023

See all articles by Hazem Krichene

Hazem Krichene

Scope ESG Analysis GmbH; Potsdam-Institut für Klimafolgenforschung (PIK)

Arne Platteau

Scope ESG Analysis GmbH

Date Written: January 13, 2023

Abstract

The recent literature has well documented the impact of climate on per capita gross domestic product across countries. However, except for a few country-specific studies, the literature on climate impact on sectoral activities still needs to be explored. Using a panel data regression approach across 184 countries and seven economic sectors, we find that temperature shows a non-linear impact across all sectoral outputs, while precipitation has statistically significant negative impact only on agricultural output. Furthermore, we find that temperature has a permanent impact on agriculture, mining, and manufacturing, suggesting the presence of the so-called "growth'' effect. Finally, considering development pathways under the SSP2-RCP6.0 scenarios, our results suggest that agriculture is the most severely affected sector by future global warming, followed by mining, construction, manufacturing, and transport. Our results have important implications for the assessment of climate-related economic losses and for policy advice on sector-specific adaptation and mitigation strategies.

Keywords: Temperature, Damage function, Economic sectors, Future damages

JEL Classification: O44, Q54, F63, C50

Suggested Citation

Krichene, Hazem and Platteau, Arne, The Impact of Climate on the Production of Economic Sectors (January 13, 2023). Available at SSRN: https://ssrn.com/abstract=4323841 or http://dx.doi.org/10.2139/ssrn.4323841

Hazem Krichene (Contact Author)

Scope ESG Analysis GmbH ( email )

Potsdam-Institut für Klimafolgenforschung (PIK) ( email )

Telegrafenberg 31
Potsdam, Brandenburg 14473
Germany

Arne Platteau

Scope ESG Analysis GmbH ( email )

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