There is a very interesting new paper on this topic by Ishan B. Nath, Valerie A. Ramey, and Peter J. Kleinow. Here is the abstract:
Does a permanent increase in temperature reduce the rate or rate of GDP growth in the affected countries? Different answers to this question result in outstanding estimates of climate damage varying by an order of magnitude. This paper combines indirect evidence on economic growth and new empirical estimates of the dynamic effects of temperature on GDP to argue that warming has persistent, but not permanent, effects on growth. We begin by presenting a large body of evidence that technology flows are driving global growth rates together, preventing temperature change from causing growth rates to diverge permanently. We then use data from a panel of countries to show that temperature shocks have large and persistent effects on GDP, driven in part by the persistence of temperature itself. These estimates imply projected future impacts three to five times larger than rate effect estimates and two to four times smaller than permanent growth effect estimates, with large differences in hot and cold countries initially.
Here is an important part of intuition:
We present a large body of evidence that global growth is aggregated across countries, suggesting that country-specific shocks are unlikely to cause permanent changes in country-level growth rates…Relatively, we find that differences in income levels across countries are highly persistent, while differences in growth are common to be temporary.
Another way of making the point is that the human model of the process should be compatible with the pre-carbon explosion model of income inequality (ever seen those media articles about how warming from climate change is supposed to be making us stupid, with no thought to the possible consequences of that effect?
After the authors ran through all their final calculations, 3.7 degrees Centigrade of warming reduced global gdp by 7 to 12 percent by 2099, compared to no warming at all. In sub-Saharan Africa, gdp decreases by 21 percent, but in Europe gdp increases by 0.6 percent, again in 2099.
The authors also work out how sensitive the results are to what is a level effect and what is a growth effect. For example, if a warm Europe leads to a permanent growth effect, Europe will see a doubling of income, compared to the case of no warming. Africa’s GDP decline will be 88 percent, not just 21 percent.
By the way, the authors suggest the growth point of the world (rat’ mal!) is thirteen degrees Centigrade.
This paper has many different moving parts, so it is difficult to determine which answer is right, a point the authors emphasize rather than try to hide. In any case it represents a great advance of thought in this very difficult area.
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