Countries and its Implications for Global Warming"
BY: JOHN K. HOROWITZ
University of Maryland
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=260990
Paper ID: U of Maryland Working Paper No. 01-02
Date: February 14, 2001
Contact: JOHN K. HOROWITZ
Email: Mailto:horowitz at arec.umd.edu
Postal: University of Maryland
Department of Agricultural and Resource Economics
2200 Symons Hall
College Park, MD 20742 USA
Phone: 301-405-1273
Fax: 301-314-9091
ABSTRACT:
One way of gauging how global warming will affect an economy is
to look at the economic performance of countries that are
warmer. This paper looks at the income-temperature relationship
for a cross-section of 156 countries in 1999. As is well known,
hotter countries are poorer on average. The widespread belief is
that this relationship is mostly historical; that is, due to a
past effect of climate. Acemoglu, Johnson, and Robinson have
recently made great gains in identifying a specific historical
path. They posit that mortality rates of early colonizing
settlers had a profound effect on the institutions that were set
up in those colonies. These institutional differences persist to
this day, they argue, and have strong effects on current
incomes. Because colonial mortality and average temperature are
highly correlated, the mortality-income relationship also
manifests itself as an income-temperature relationship. There
is, however, sufficient evidence to warrant continued
examination of the income-temperature relationship. First, we
find a strong income-temperature relationship within OECD
countries, a result that does not appear to be predicted by the
colonial mortality model and that various authors seem to
disavow. Second, we find that the income-temperature
relationship is essentially the same within the OECD and
non-OECD countries, a striking yet unremarked and as-yet
unexplained result. Third, we find an exceptionally strong
income-temperature relationship within the fifteen countries of
the former Soviet Union, where colonial institutions would seem
to have been wiped out. Our best measure of the effect of
temperature on income, after accounting for the influence of
colonial mortality, is that a one percent increase in
temperature leads to a -0.9 percent decrease in per capita
income. Thus, a temperature increase of 3 degrees Fahrenheit
would result in a 4.6 percent decrease in world GNP.
Keywords: global warming, income and temperature, new
geography, colonial mortality