warmth & the economy

Doug Henwood dhenwood at panix.com
Sat Sep 1 10:27:08 PDT 2001


"The Income-Temperature Relationship in a Cross-Section of

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



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