Tuesday, July 21, 2009

HOW CLIMATE AFFECTS THE ECONOMY

Morning Edition NPR - New research suggests that higher temperatures can have a damaging effect on the economies of poor countries. The study, by economists at the Massachusetts Institute of Technology, found that in years with higher temperatures, poor countries experienced significantly slower economic growth.

The research adds to an economic puzzle that dates back hundreds of years: Why do the poorer economies of the world tend to be in hot places, while the more successful economies are found in cooler climates?

The French writer Montesquieu wondered about it in the 1700s. Now there is significantly more data to work with. A graph of per-capita GDP and average temperature shows rich countries at one end - Norway, Germany, France and the U.S. - and poverty at the other end in Cambodia, Liberia and Congo.

Many researchers have written this off as a historical accident, perhaps a legacy of colonialism.

Ben Olken, an associate professor of economics at MIT, and his colleagues wanted to examine the temperature connection more closely. They decided that instead of comparing one country to another, they would look within countries. Did a hot year mean slower economic growth?

The answer appears to be yes. They found that for poor countries, an increase in annual average temperature by 1 degree centigrade corresponded to a 1.1 percent drop in per-capita gross domestic product. . .

It's unclear exactly why temperature would have this effect. It might be that crop yields go down, or that disease is more of a problem. Or it might just be what you could call the "sloth" theory - it's hard to work when it's hot out. Who wants to mow the lawn in August?