Working Paper: NBER ID: w25008
Authors: Derek Lemoine
Abstract: I formally define the limits of what we can learn about the consequences of long-run climate change from short-run weather shocks. I show that conventional approaches to estimating climate impacts require assuming that payoffs are independent of capital and resource stocks. I derive a new indirect least squares estimator that bounds long-run climate impacts from short-run responses to weather under less restrictive assumptions. In an application to the U.S. economy, I project that climate change will reduce steady-state income per capita by at least 1.8% in the Midwest, by at least 1% in the Northeast, and by at least 0.23% in the West. Each lower bound implies damages beyond the 95% confidence intervals produced by the conventional approach.
Keywords: Climate Change; Weather Shocks; Economic Output; Indirect Least Squares Estimator
JEL Codes: D84; H43; Q54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| short-run adaptive responses to weather shocks (Q54) | long-run responses to climate change (Q54) |
| method of estimation (C13) | projected climate impacts (Q54) |
| short-run adaptation decisions (D25) | long-run outcomes (P27) |