The link between regional temperature and regional incomes: econometric evidence with sub-national data. (11th February 2021)

• Record Type: Journal Article
• Authors: Greßer, Christina; Meierrieks, Daniel; Stadelmann, David
• Is Part Of: Economic policy. Volume 36:Number 107(2021)
• Page Start: 523
• Page End: 550
• Publication Date: 2021-02-11
• Subjects: Q54 -- Q56 -- R11; regional temperature -- regional economic development -- sub-national data -- non-linearity; Economic policy -- Periodicals; 338.94
• DOI: 10.1093/epolic/eiab007
• Languages: English
• ISSNs: 0266-4658

Abstract

Summary: We study the link between temperature and economic development at the sub-national level, employing cross-sectional data from two distinct sources. In contrast to much of the existing cross-country literature on the temperature–income relationship, our setting allows for the inclusion of country-fixed effects. Once we account for country-fixed effects, we do not find a statistically robust relationship between regional temperature and three different measures of regional economic development (per capita GDP, nightlights and gross cell production). We also test whether temperature is non-linearly related to regional income (with hotter regions being potentially particularly prone to adverse effects of temperature on income) but find no systematic evidence in favour of such a relationship. Finally, we examine whether the effect of temperature on economic development is especially pronounced in poorer regions (e.g., due to weaker adaptation). Again, we find no statistically robust link.