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A Hotter Climate Limits Growth

New research by MIT’s Benjamin Olken shows that countries experienced significantly slower growth in years with higher temperatures.

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New research by MIT’s Benjamin Olken shows that poor countries experienced significantly slower growth in years with higher temperatures.

It seems pretty obvious that droughts and hot weather hurt agricultural output and growth, but MIT professor of economics Benjamin Olken asserts that even localized hot spells can significantly damage long-term economic growth in developing countries.

One of the authors of a recent paper published in the American Economic Journal: Macroeconomics, Olken and his colleagues found that every 1 degree Celsius increase in temperature in a poor country reduces economic growth by around 1.3 percentage points, and that higher temperatures also may reduce the rate of growth.

To reach their conclusions, the study’s authors looked at the average temperatures within countries, rather than across countries, as many previous studies have done. Using temperature and economic data for every country between 1950 through 2003, they found that countries experienced significantly slower growth in years with higher temperatures. This appears to apply only to developing nations, not the wealthier countries of the developed world.

In addition to agriculture, higher temperatures affect industrial output (think: no air conditioning in a crowded factory) and commerce in general (who wants to go to go out when it’s 105 unless they have to?). Heat can also affect political stability in developing countries, especially when it is sustained over several years, creating increasing hardship for already stressed populations.

(It’s instructive to remember, as Olken points out, that before the advent of air conditioning, the U.S. federal government shut down on the kind hot, swampy days that have plagued Washington, D.C. this summer.)

Slower growth rates affect many sectors of the economy, and may also lower investments in developing countries. This points to a widening gap between rich and poor. “The impacts of these things are going to be worse for the countries that have the least ability to adapt to it,” Olken told MIT News. “[We] want to think that through for the implications for future inequality.

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Leading Sustainable Organizations

Corporate adoption of sustainable business practices is essential to a strong market environment and an enduring society. What does it mean to become a sustainable business and what steps must leaders take to integrate sustainability into their organization?
More in this series

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Comments (3)
Kaythi Aung
It is interesting to know that "every 1 degree Celsius increase in temperature in a poor country reduces economic growth by around 1.3 percentage points, and that higher temperatures also may reduce the rate of growth."
It is logically sensible to say that as poor countries mainly depend on agricultural sector and are easily vulnerable to disasters that are directly variable with weather conditions.
However, to affirm heat effect on industrial output and political matter (indirect sufferers), the measure would be perfect only when it goes on with both developed countries and developing countries.
Majanduskasvu sõltuvus kliimast | Pärnu Konverentsid
[...] https://sloanreview.mit.edu/improvisations/2012/09/11/a-hotter-climate-limits-growth/ [...]
What Peter Drucker Would Be Reading | The Drucker Exchange | Daily Blog by The Drucker Institute
[...] 2.     A Hotter Climate Limits Growth: I’m hot. Let’s take the day off. Nina Kruschwitz reports at MIT Sloan Management Review on new research by MIT professor of economics Benjamin Olken, who suggests that hot spells in developing countries can impede economic growth. How much? “Olken and his colleagues found that every 1 degree Celsius increase in temperature in a poor country reduces economic growth by around 1.3 percentage points” by cutting into agricultural production, factory output, commerce and more. [...]