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In The
News
As Planet Warms, Poor
Nations Face Economic Chill
Science Daily (Mar. 20,
2009)
A rising tide is said to
lift all boats. Rising global temperatures, however, may lead to
increased disparities between rich and poor countries, according
to a recent MIT economic analysis of the impact of climate change
on growth.
After examining worldwide
climate and economic data from 1950 to 2003, Benjamin A. Olken,
associate professor in the Department of Economics, concludes that
a 1 degree Celsius rise in temperature in a given year reduces
economic growth by an average of 1.1 percentage points in the
world's poor countries but has no measurable effect in rich
countries.
Olken says his research
suggests higher temperatures will be disproportionately bad for
the economic growth of poor countries compared to rich countries.
The precise reasons why
higher temperatures lower economic output are likely to be
complex, but Olken's results suggest the importance of
temperature's impact on agricultural output. His data also provide
evidence for a relationship between temperature and industrial
output, investment, research productivity and political stability.
"The potential impacts of
an increase in temperature on poor countries are much larger than
existing estimates have suggested," Olken says. "Although
historical estimates don't necessarily predict the future, our
results suggest that one should be particularly attentive to the
potential impact of climate change on poorer countries."
Olken's analysis is
contained in "Climate Shocks and Economic Growth: Evidence from
the Last Half Century," a paper co-authored by MIT economics
graduate student Melissa Dell and Benjamin F. Jones, associate
management professor at Northwestern University. The paper is
currently under review for publication. Olken, who has been
researching issues of growth and temperature for about two years,
presented some of the findings at a recent conference of the
American Economic Association.
Growing
hot-cold divide
It has long been observed
that hotter countries, such as those in sub-Saharan Africa and
parts of Latin America, tend to be poorer than cooler countries in
North America and Europe; the main exceptions are hot, rich Middle
East countries with oil reserves and cold, poor Communist or
former Communist states like North Korea and Mongolia. What
contemporary scholars have debated, however, is whether climate
has a significant effect on a country's economy today or whether
it is institutions and policies that now solely drive prosperity.
To conduct their
research, Olken and his co-authors used existing data sets of
economic growth and productivity -- everything from gross domestic
product to the rate of publication of scientific papers -- and
combined them with country-by-country temperature and
precipitation data from 1950 to 2003.
Olken and his co-authors
conclude that rising temperatures do substantially reduce economic
output and growth rates in both agricultural and industrial
sectors, but only in countries that are already poor. Higher
temperatures also reduce investment and innovation but, again,
only in poor nations.
Rising temperatures may
also have political consequences, the authors found. A one-degree
rise in temperature in poor countries raises the likelihood of a
so-called irregular leader transition (i.e., a coup) by 3.9
percentage points.
Olken acknowledges that
the long-term impact of temperature change might be different from
the short-term effect since countries may adapt to a particular
climate over time. But his research found no such adaptation over
a 10-year time horizon.
Should the future effects
mirror recent history, world policy makers should be prepared for
a widening gap between rich and poor countries as the globe
continues to warm, he says. |
