What Do We Learn from the Weather? The New Climate-Economy Literature
with Melissa Dell and Ben Olken
Journal of Economic Literature, forthcoming
Abstract: A rapidly growing body of research applies panel methods to examine how temperature,
precipitation, and windstorms influence economic outcomes. These studies focus on
changes in weather realizations over time within a given spatial area and demonstrate
impacts on agricultural output, industrial output, labor productivity, energy demand,
health, conflict, and economic growth among other outcomes. By harnessing exogenous
variation over time within a given spatial unit, these studies help credibly identify (i) the
breadth of channels linking weather and the economy, (ii) heterogeneous treatment
effects across different types of locations, and (iii) non-linear effects of weather variables.
This paper reviews the new literature with two purposes. First, we summarize recent
work, providing a guide to its methodologies, data sets, and findings. Second, we
consider applications of the new literature, including insights for the "damage function" within models that seek to assess the potential economic effects of future climate change.