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It seems pretty obvious that droughts and hot weather hurt agricultural output and growth, but MIT professor of economics Benjamin Olken asserts that even localized hot spells can significantly damage long-term economic growth in developing countries.
One of the authors of a recent paper published in the American Economic Journal: Macroeconomics, Olken and his colleagues found that every 1 degree Celsius increase in temperature in a poor country reduces economic growth by around 1.3 percentage points, and that higher temperatures also may reduce the rate of growth.
To reach their conclusions, the study’s authors looked at the average temperatures within countries, rather than across countries, as many previous studies have done. Using temperature and economic data for every country between 1950 through 2003, they found that countries experienced significantly slower growth in years with higher temperatures. This appears to apply only to developing nations, not the wealthier countries of the developed world.
In addition to agriculture, higher temperatures affect industrial output (think: no air conditioning in a crowded factory) and commerce in general (who wants to go to go out when it’s 105 unless they have to?). Heat can also affect political stability in developing countries, especially when it is sustained over several years, creating increasing hardship for already stressed populations.
(It’s instructive to remember, as Olken points out, that before the advent of air conditioning, the U.S. federal government shut down on the kind hot, swampy days that have plagued Washington, D.C. this summer.)
Slower growth rates affect many sectors of the economy, and may also lower investments in developing countries. This points to a widening gap between rich and poor. “The impacts of these things are going to be worse for the countries that have the least ability to adapt to it,” Olken told MIT News. “[We] want to think that through for the implications for future inequality.