Climate change and economic growth: a heterogeneous panel data approach

Abstract

Climate change is a global phenomenon. Its impact on economic growth must therefore be analyzed in accordance with its (time-varying) common effects. We present an econometric analysis that evaluates this effect taking into account its global nature. Contrary to previous evidence that ignores the global effects, we obtain that the rising temperature has not decreased growth in real GDP per capita in the second half of the twentieth century for the world countries. However, we obtain a negative effect of rising temperatures and a positive effect of rising precipitation in poor countries. This positive effect of rising precipitation is also confirmed for hot and temperate countries.

Keywords: Economic growth; Global warming; Industrial output; Precipitation; Temperature.