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The GDP-Temperature relationship: Implications for climate change damages

Publication ,  Journal Article
Newell, RG; Prest, BC; Sexton, SE
Published in: Journal of Environmental Economics and Management
July 1, 2021

Econometric models of temperature impacts on GDP are increasingly used to inform global warming damage assessments. But theory does not prescribe estimable forms of this relationship. By estimating 800 plausible specifications of the temperature-GDP relationship, we demonstrate that a wide variety of models are statistically indistinguishable in their out-of-sample performance, including models that exclude any temperature effect. This full set of models, however, implies a wide range of climate change impacts by 2100, yielding considerable model uncertainty. The uncertainty is greatest for models that specify effects of temperature on GDP growth that accumulate over time; the 95% confidence interval that accounts for both sampling and model uncertainty across the best-performing models ranges from 84% GDP losses to 359% gains. Models of GDP levels effects yield a much narrower distribution of GDP impacts centered around 1–3% losses, consistent with damage functions of major integrated assessment models. Further, models that incorporate lagged temperature effects are indicative of impacts on GDP levels rather than GDP growth. We identify statistically significant marginal effects of temperature on poor country GDP and agricultural production, but not rich country GDP, non-agricultural production, or GDP growth.

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Published In

Journal of Environmental Economics and Management

DOI

EISSN

1096-0449

ISSN

0095-0696

Publication Date

July 1, 2021

Volume

108

Related Subject Headings

  • Agricultural Economics & Policy
  • 3801 Applied economics
  • 1402 Applied Economics
  • 1401 Economic Theory
  • 0502 Environmental Science and Management
 

Citation

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Newell, R. G., Prest, B. C., & Sexton, S. E. (2021). The GDP-Temperature relationship: Implications for climate change damages. Journal of Environmental Economics and Management, 108. https://doi.org/10.1016/j.jeem.2021.102445
Newell, R. G., B. C. Prest, and S. E. Sexton. “The GDP-Temperature relationship: Implications for climate change damages.” Journal of Environmental Economics and Management 108 (July 1, 2021). https://doi.org/10.1016/j.jeem.2021.102445.
Newell RG, Prest BC, Sexton SE. The GDP-Temperature relationship: Implications for climate change damages. Journal of Environmental Economics and Management. 2021 Jul 1;108.
Newell, R. G., et al. “The GDP-Temperature relationship: Implications for climate change damages.” Journal of Environmental Economics and Management, vol. 108, July 2021. Scopus, doi:10.1016/j.jeem.2021.102445.
Newell RG, Prest BC, Sexton SE. The GDP-Temperature relationship: Implications for climate change damages. Journal of Environmental Economics and Management. 2021 Jul 1;108.
Journal cover image

Published In

Journal of Environmental Economics and Management

DOI

EISSN

1096-0449

ISSN

0095-0696

Publication Date

July 1, 2021

Volume

108

Related Subject Headings

  • Agricultural Economics & Policy
  • 3801 Applied economics
  • 1402 Applied Economics
  • 1401 Economic Theory
  • 0502 Environmental Science and Management