The Food Problem and the Aggregate Productivity Consequences of Climate Change

77 Pages Posted: 9 Jun 2020

See all articles by Ishan Nath

Ishan Nath

University of Chicago - Department of Economics

Date Written: June 2020

Abstract

This paper integrates local temperature treatment effects and a quantitative macroeconomic model to evaluate the impact of climate change on sectoral reallocation and aggregate productivity. First, I use firm-level data from a wide range of countries to estimate the effect of temperature on productivity in manufacturing and services. Estimates suggest that extreme heat reduces non-agricultural productivity, but less so than in agriculture, implying that hot countries could adapt to climate change by importing food and shifting labor toward manufacturing. Second, I embed my estimates in an open-economy model of structural transformation covering 158 countries to investigate this possibility. Simulations suggest that subsistence food requirements drive agricultural specialization more than comparative advantage, however, such that climate change perversely pulls labor into agriculture where its productivity suffers most and reallocation exacerbates the global decline in GDP. The productivity effects of climate change reduce welfare by 1.5-2.7% overall and 6-10% for the poorest quartile. Trade reduces the welfare costs of climate change by only 7.4% under existing policy, but by 31% overall and 68% for the global poor in a counterfactual scenario that assigns all countries the 90th percentile level of trade openness.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Suggested Citation

Nath, Ishan, The Food Problem and the Aggregate Productivity Consequences of Climate Change (June 2020). NBER Working Paper No. w27297, Available at SSRN: https://ssrn.com/abstract=3621802

Ishan Nath (Contact Author)

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
5
Abstract Views
61
PlumX Metrics