TY  - UNPD
A1  - Donadelli, Michael
A1  - Jüppner, Marcus
A1  - Riedel, Max
A1  - Schlag, Christian
T1  - Temperature shocks and welfare costs
T2  - SAFE working paper series ; No. 177
N2  - This paper examines the welfare implications of rising temperatures. Using a standard VAR, we empirically show that a temperature shock has a sizable, negative and statistically significant impact on TFP, output, and labor productivity. We rationalize these findings within a production economy featuring long-run temperature risk. In the model, macro-aggregates drop in response to a temperature shock, consistent with the novel evidence in the data. Such adverse effects are long-lasting. Over a 50-year horizon, a one-standard deviation temperature shock lowers both cumulative output and labor productivity growth by 1.4 percentage points. Based on the model, we also show that temperature risk is associated with non-negligible welfare costs which amount to 18.4% of the agent's lifetime utility and grow exponentially with the size of the impact of temperature on TFP. Finally, we show that faster adaptation to temperature shocks results in lower welfare costs. These welfare benefits become substantially higher in the presence of permanent improvements in the speed of adaptation.
T3  - SAFE working paper - 177 
KW  - temperature shocks
KW  - long-run growth
KW  - asset prices
KW  - welfare costs
KW  - adaptation
Y1  - 2017
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/43749
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-437499
UR  - https://ssrn.com/abstract=3013537
PB  - SAFE
CY  - Frankfurt am Main
ER  -