Climate Change and Economic Activity: Evidence from U.S. States

JIWP Number: 2203

Mohaddes, K., Ng, R. N. C., Pesaran, M. H., Raissi, M. and Yang, J-C.

Abstract

We investigate the long-term macroeconomic effects of climate change across 48 U.S. states over the period 1963-2016 using a novel econometric strategy which links deviations of temperature and precipitation (weather) from their long-term moving-average historical norms (climate) to various state-specific economic performance indicators at the aggregate and sectoral levels. We show that climate change has a long-lasting adverse impact on real output in various states and economic sectors, and on labour productivity and employment in the United States. Moreover, in contrast to most cross-country results, our within U.S. estimates tend to be asymmetrical with respect to deviations of climate variables (including precipitation) from their historical norms.

Classification JEL
C33
O40
O44
O51
Q51
Q54
JIWP