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Global Non-Linear Effect of Temperature on Economic Production

September 15, 2015 | 16:30 ET, 20:30 GMT

Growing evidence demonstrates that climatic conditions can have a profound impact on the functioning of modern human societies, but effects on economic activity appear inconsistent. Here we unify seemingly contradictory results in the existing literature by accounting for nonlinearity at the macroeconomic scale. We show that overall economic productivity is nonlinear in temperature for all countries, with productivity peaking at an annual average temperature of 13C and declining strongly at higher temperatures. The relationship is globally generalizable, unchanged since 1960, and apparent for agricultural and non-agricultural activity in both rich and poor countries. If future adaptation mimics past adaptation, unmitigated warming will reshape the global economy by reducing average global incomes roughly 25% by 2100 and widening global income inequality, relative to scenarios without climate change.

Speakers

Professor, University of California, Berkeley

Senior Vice President and Chief Economist, World Bank Group