No matter how it is measured, income declines with global warming

Research output: Contribution to journalArticle

8 Scopus citations

Abstract

The contemporaneous relationship between temperature and income is important because it enables economists to estimate the economic impact of global warming without assuming a structural model. Until recently, empirical evidence generally suggests that there is a negative relationship between temperature and income, and, therefore, global warming has an adverse impact on economic activity. However, Nordhaus (2006) argues that the temperature-income relationship depends on how income is measured. We show in this paper that the results of Nordhaus (2006) may be due to an omitted-variable problem. Based on a well-motivated temperature-income model, we find that the relationship between temperature and income is not dependent on income measurement. Our regression results show that the adverse impact of an increase of 1. °C in temperature can be as much as a 3% decrease in total income for the G-7 nations. Therefore, our results suggest an aggressive climate mitigation policy.

Original languageEnglish (US)
Pages (from-to)963-970
Number of pages8
JournalEcological Economics
Volume70
Issue number5
DOIs
StatePublished - Mar 15 2011

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Keywords

  • Global warming
  • Income
  • Quantile regression
  • Temperature

ASJC Scopus subject areas

  • Environmental Science(all)
  • Economics and Econometrics

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