A1729
Title: Macroeconomic consequences of sustained warming: A bias-corrected dynamic heterogeneous panel approach
Authors: Jui-Chung Yang - National Taiwan University (Taiwan) [presenting]
Abstract: The aim is to study how increasing temperatures have affected the economies of 195 countries between 1960 and 2022, focusing on income losses caused by gradual shifts to new climate conditions. A dynamic heterogeneous panel model is developed to distinguish between long-term and short-term effects, account for adaptation through rolling climate norms, and address key econometric challenges including nonstationarity, cross-country heterogeneity, and unobserved global factors. Findings reveal that a sustained 0.01C annual increase in temperatures above historical climate norms reduces global GDP per capita growth by 0.05 percentage points per year, with income losses accumulating as long as temperatures keep increasing. This effect is 70\% larger than what would be estimated under a homogeneous panel specification. Contrary to much of the existing literature, no country appears immune to the impacts of rising temperatures: middle- and high-income nations, as well as those in temperate or cold and hot climate zones, all exhibit persistent (though not permanent) growth slowdowns, with income losses linked to how quickly they adapt.
