Stanford Graduate School of BusinessEp80 Will Climate Change Really Lower Economic Growth?
Stanford Graduate School of Business
Climate change and GDP 0:06
The discussion centers on a paper about permanent climate change and GDP, and on the hard question of whether warming lowers economic output in levels or in growth. It focuses only on temperature and leaves other parts of climate change aside.
Evidence from states 5:30
The speakers note that people adapt to the climate where they live, so a sudden change should hurt output. But the size matters. They compare Wisconsin and Florida, which differ by about 15 degrees Celsius on average, yet have almost the same per capita GDP. Across U.S. states, warmer places show only a little over 1% lower GDP for each degree Celsius.
Why weather shocks mislead 7:30
They argue that much of the literature looks at short-term weather shocks, not permanent climate change. A one-day shift is compared to a forced change of language in ancient Gaul: people would not adapt, so the short-run GDP drop would overstate the effect of a lasting change. They also point to heating and cooling technology as a reason permanent effects may differ from temporary ones.
Mover wage tests 11:00
To get closer to a permanent climate shift, they look at people moving between Florida and Wisconsin and use mover wages as the evidence. Movers generally earn more after moving, as expected, and the wage gain looks much the same in either direction. The implied temperature effect is tiny, about 0.2% per degree Celsius, far smaller than the large losses claimed in parts of the literature.
A skeptical reading 15:00
They do not claim climate has no effect. They do say the very large estimates in the literature look implausible when set against state differences and mover data. If the losses were truly that large, they think they should show up more clearly when people move, and temporary weather changes should not be treated as a guide to permanent climate change.
Weather data limits 16:30
Small weather swings can change behavior for a day, like taking a hot afternoon off for the beach. But once that heat becomes normal and people add air conditioning, that response fades. So short-term weather effects are real, yet they are a weak guide to what permanent climate change will do to GDP.
Migration and climate 18:01
The speakers point to a net move in the United States toward warmer places since air conditioning spread, which looks like revealed preference. They say that raises a hard question: if people are moving toward warmth, why assume warmer climates are bad for economic activity? They also note that the U.S. setting is unusually comparable across states, unlike cross-country studies.
Why the number matters 21:02
They call for more work to explain why different studies produce estimates that are so far apart. The size of the effect matters for policy. If warming barely changes output, other climate harms still matter, but economists should worry less about GDP. If warming cuts GDP by 50 percent at 2.5 degrees, alarm bells should ring.
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