Climate Shocks, Cyclones, and Economic Growth: Bridging the Micro-Macro Gap

Working Paper No. 24893 Empirical analyses of the impacts of climatic shocks on growth, while critical for policy, have found seemingly disparate results and are seldom incorporated into macroeconomic climate-economy models. This paper seeks to bridge this micro-macro gap through the case of tropica...

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Bibliographic Details
Published in:NBER Working Paper Series 2018-08, p.24893
Main Authors: Bakkensen, Laura, Lint Barrage
Format: Article
Language:English
Subjects:
Climate
Cyclones
Economic models
Economic theory
Growth models
Social costs
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Summary:Working Paper No. 24893 Empirical analyses of the impacts of climatic shocks on growth, while critical for policy, have found seemingly disparate results and are seldom incorporated into macroeconomic climate-economy models. This paper seeks to bridge this micro-macro gap through the case of tropical cyclones. We first present a stochastic endogenous growth model that can reconcile previous empirical findings. We then empirically estimate the impacts of cyclones on the structural determinants of growth (total factor productivity, depreciation, fatalities), instead of growth itself, facilitating direct inclusion into the seminal DICE climate-economy model. Cyclone damages are estimated to increase the social cost of carbon by 10-15%.
ISSN:0898-2937
DOI:10.3386/w24893