Temperature and Income: Reconciling New Cross-Sectional and Panel Estimates
This paper presents novel evidence and analysis of the relationship between temperature and income. First, using sub-national data from 12 countries in the Americas, we provide new evidence that the negative cross-country relationship between temperature and income also exists within countries and even within states. Second, we provide a theoretical framework for reconciling the substantial, negative association between temperature and income in the cross-section with the even stronger short-run effects of temperature estimated by panel models. The theoretical framework suggests that half of the negative short-term effects of temperature may be offset in the long run through adaptation.
Published: Dell, Melissa, Benjamin F. Jones, and Benjamin A. Olken. "Temperature and Income: Reconciling New Cross-Sectional and Panel Estimates." American Economic Review 99, 2 (2009): 198-204.
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