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Long-run macroeconomic impact of climate change ontotal factor productivity - Evidences from Emerging Economies

Author

Listed:
  • Naveen Kumar

    (Department of Economics, Delhi School of Economics)

  • Dibyendu Maiti

    (Department of Economics, Delhi School of Economics)

Abstract
Emerging economies (EMEs) often ignore effective mitigation strategies for climate risks to prioritise growth acceleration. This paper shows that EMEs cannot sustain their economic growth trajectory due to the adverse impact of climate change on total factor productivity (TFP). Using a standard growth model, it demonstrates how temperature rise and variation from growing industrial emissions reduce capital productivity along with the damage to ecosystem services and labour productivity, adversely impacting total factor productivity (TFP). A cross-sectional augmented auto-regressive distributed lag model (CS-ARDL), which addresses the issues of endogeneity and cross-sectional dependence with stochastic trends, has been applied to 21 EMEs over the period from 1990 to 2018 and reveals a strong negative impact of temperature rise on total factor productivity. Although EMEs have heterogeneous impacts across the countries depending upon their climatic zones and income levels, a one-degree increase in temperature, on average, decreases the TFP by approximately 3 per cent. It is much higher in the extreme climatic zones and less developed EMEs. JEL Code: O47, Q50, O44

Suggested Citation

  • Naveen Kumar & Dibyendu Maiti, 2023. "Long-run macroeconomic impact of climate change ontotal factor productivity - Evidences from Emerging Economies," Working papers 342, Centre for Development Economics, Delhi School of Economics.
    • Handle: RePEc:cde:cdewps:342
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    References listed on IDEAS

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    Cited by:

    1. Gagliardi, Nicola & Grinza, Elena & Rycx, François, 2024. "The Productivity Impact of Global Warming: Firm-Level Evidence for Europe," GLO Discussion Paper Series 1485, Global Labor Organization (GLO).
    2. Ying Cao & Zhixiong Fan & Weiqiang Chen & Zhijian Cao & Anyin Jiang, 2024. "Climate Change, Biased Technological Advances and Agricultural TFP: Empirical Evidence from China," Agriculture, MDPI, vol. 14(8), pages 1-19, July.

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    More about this item

    Keywords

    TFP; Temperature Shocks; Panel CS-ARDL; Emerging markets;
    All these keywords.

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth

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