Rising Temperatures Undermining Economic Growth, Driving Down Incomes
This report investigates the effects of climate change on income. Looking at U.S. county-level per capita incomes from 2000-2019, the study uses “no human” weather models to estimate how temperatures would have been different over that period were it not for human intervention. Then, using standard econometric models that link temperature to income, the report determines that climate change has reduced U.S. incomes, on average, by between 0.4% and 4% over the study period.
The calculations in the report don’t fully account for the financial effects of climate change, as they exclude factors like precipitation, sea level rise, and discrete weather events like hurricanes. They do capture a key feature of climate change, which is that it generally increases the incidence of warm and hot days, and decreases the incidence of cool and cold days in most of the counties studied. Interestingly, additional cold and cool days tend to increase a county’s income, while additional hot and warm days tend to decrease it.
The report finds a number of regional variations in how temperatures affect income. Counties with higher average temperatures tend to benefit more from cool and cold days, while warm and hot days tend to affect counties in the north more severely and counties in the west less severely. There are also differences related to local economies, with more agricultural counties suffering more severe effects from warm or hot days, while areas with a larger manufacturing base are less seriously impacted by warmer weather.
Watch the webinar from Professor Lemoine entitled “Discussion on How Climate Change is Driving Down Incomes”.