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Impact of temperature on economic production

In 2015, Marshall Burke, Sol Hsiang, and Ted Miguel published a paper in Nature that looked at the relationship between temperature (climate) and economic output. They examined the historical impact of temperature changes (1960-2010) on 166 countries and then used this data to try and predict the potential future impacts of climate change on GDP per capita.   

What they discovered is that temperature has a non-linear impact on economic production. Put differently, there’s an optimal annual average temperature. And it turns out to be 13 degrees celsius. If a country sits below this average number, then warming increases productivity. But if a country sits above this number, then warming has a negative impact on productivity. And the impact gets worse (stronger negative correlation) at higher temperatures.

Some of you are probably wondering whether the correlations they found should be interpreted as causation. For what it’s worth, the study tries to correct for non-temperature related economic changes (such as a recession or policy changes) and it also looks at how individual countries perform against themselves during temperature fluctuations. So the control and treatment groups are arguably pretty tight.

All of this suggests that there are a number of countries that stand to benefit from climate change (at least from this perspective). They are the ones that are cold today. 

For more on the study, click here.

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