Three Essays on Economic Growth and Climate Change

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University of Guelph

Abstract

Numerous studies have shown that the effects of climate change on income and economic growth vary within and among countries, which makes it crucial to develop spatially detailed databases. While climate data is available at the grid-cell level, economic data is typically available at the national level. This thesis focuses on developing and applying new climate-economy datasets at the grid-cell level using a combination of previous spatial economic datasets and infilling models utilizing air-traffic and satellite nighttime light datasets as predictor variables. In Chapter-1, we build new datasets which measure economic activity matched with temperature and precipitation data at the grid-cell level, to aid a more precise measurement of climate impacts on macroeconomic variables. Using the newly constructed datasets we estimate the impact of temperature and precipitation changes on income levels across countries. We find that the marginal effect of warming on income tends to be small and positive but in low-income countries it declines as temperature rises. Marginal effects of precipitation on income decline as average precipitation rises and are more likely to be negative depending on income. Chapter-2 utilizes the datasets built in Chapter-1 to measure the impacts of climate change on income growth rates globally. We deviate from the traditional approach of dividing countries into a static categorization of rich or poor by allowing a continuous interaction between climate and income levels. Using both approaches we find that climate change has a small but insignificant impact on the economic growth rate of either rich or poor countries, a finding which is in line with recent studies in the climate-growth literature. In Chapter-3, we use the growth effects estimated in Chapter-2 to simulate income levels for countries across the globe for the year 2050 under a no-warming and a 1°C warming scenario. Defining willingness-to-pay for mitigation as the difference in income levels between the two scenarios, we find that it varies within a country, with richer regions having a higher willingness-to-pay than poor regions. We also find that the loss in world GDP by the year 2050 under a 1°C warming outcome would be small, approximately 0.1%.

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Keywords

Climate change, Temperature, Gross cell product, Economic growth, Precipitation

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