A recent paper published in Nature by Marshall Burke, Solomon M. Hsiang and Edward Miguel Global non-linear effect of temperature on economic production argues that increasing temperatures will cause much greater damage to the world economy than has been previously predicted. Furthermore, these losses will be distributed very unequally, with tropical countries getting hit very hard and some northern countries actually benefitting.
Let me attempt a highly simplified summary to explain what they did. I’m not an economist and their analysis is not straightforward, so beware. If I confuse you, try Dana Nuccitelli’s take or Seth Borenstein’s or Bloomberg’s.
Firstly, Burke et al. looked at factors like labour supply, labour performance and crop yields and how they relate to daily temperature exposure. Generally these show little variation up to temperatures in the high twenties Celsius, at which point they fall off quickly. Secondly, those trends were aggregated to predict the relationship between annual average temperatures and the annual impact on economic output. Thirdly, they looked at annual economic output and average annual temperatures for individual countries for the period 1960-2010. Note that they only compared the economic effects of temperature change on individual countries, they did not correlate one country with another. They were able to see how the observations compared with their predicted aggregate curve.
This work showed that the GDP of countries with an annual average temperature of 13°C were the least sensitive to temperature changes. Colder countries on the left side of the hump would benefit from an increase in temperature, whereas warmer countries would see their output suffer as temperature increases. Note that the figure does not show that a certain temperature predetermines the level of wealth of a country (China, despite recent rapid growth is poorer than the US and Japan even though average annual temperatures are similar). Rather, it illustrates how susceptible countries are to increases or decreases in productivity relative to their annual average temperature.
There is some evidence that rich countries are slightly less affected by changes in temperature (the curve is a little flatter for them). There are few hot and wealthy countries examined in the study, so any general conclusions about them cannot be certain, but the evidence still points to them being more prone to damage from rising temperature than rich, cooler countries. No matter how rich you are, extra heat hurts the warm lands more than it does the temperate and the cool. You can’t buy your way out of the effects of global warming, except by moving away from the Equator or up into the highlands. Continue reading