Wirtschaftswissenschaften
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We shed new light on the macroeconomic effects of rising temperatures. In the data, a shock to global temperature dampens expenditures in research and development (R&D). We rationalize this empirical evidence within a stochastic endogenous growth model, featuring temperature risk and growth sustained through innovations. In line with the novel evidence in the data, temperature shocks undermine economic growth via a drop in R&D. Moreover, in our endogenous growth setting temperature risk generates non-negligible welfare costs (i.e., 11% of lifetime utility). An active government, which is committed to a zero fiscal deficit policy, can offset the welfare costs of global temperature risk by subsidizing the aggregate capital investment with one-fifth of total public spending.
his paper examines whether investor mood, driven by World Health Organization (WHO) alerts and media news on globally dangerous diseases, is priced in pharmaceutical companies' stocks in the United States. We concentrate on irrational investors who buy and sell pharmaceutical companies' stocks guided by beliefs as opposed to rational expectations. We argue that disease-related news (DRNs) should not trigger rational trading. We find that DRNs have a positive and significant sentiment effect among investors (on Wall Street). The effect is stronger (weaker) for small (large) companies, who are less (more) likely to engage in the development of new vaccines in the wake of DRNs. A potential negative mood (on Main Street) – induced by disease related fear – does not alter the positive sentiment effect. Our findings give rise to profitable trading strategies leading to significantly positive performances. Overall, this unparalleled research shows that large events of devastating nature to the economy can be considered as good news to some groups of interest, such as stock market traders.