Climate Change and Economic Growth: Evidence for European Countries

Abstract

Climate change is very likely to affect economies and the welfare of people around the world. In order to design appropriate policy responses, the economic effets of climate change should be known. One strand in the literature empirically estimates the growth effects of climatic variations. However, those studies often neglect economic variables that have proven to be robust in explaining economic growth. Further, often they fail to check for the robustness of their results. In this study we apply panel estimation techniques to analyze the relation between clmate change and economic growth for 24 European economies for the period from 2002 to 2019 based on different specifications. We do not find a statistically significant robust relationship between the temperature change and economic growth just as for precipitation that does not exert a significant effect on growth. As regards the institutional and macroeconomic control variables the rule of law, the fiscal variable and the output gap are statistically significant.

Keywords: Climate change, economic growth, policy implications, robustness

JEL Classification: O47, Q54