Temperature and Growth in Spatial General Equilibrium

Temperature shocks to one country affect all economically-linked countries in a contagion-like process. In this paper we develop a dynamic spatial general equilibrium trade model with weather shocks to productivity growth. We show how to identify both the direct own-country effect, and contagion effect on other countries using simple fixed effects estimators. Our empirical results indicate that a 1 standard deviation global temperature shock reduces income growth by 4 percentage points, and that contagion accounts for over half of the temperature-caused income growth reductions. Commonly used temperature-growth specifications do not capture the full global effect of country-specific temperature shocks.  Part of the Energy and Environmental Economics and Policy (EEEP) Seminar Series—Fall 2020 All the events will be https://psu.zoom.us/j/91419785635?pwd=ZU1YenNNQ1M5ME9CZyswenBKa2Y0dz09