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Sufficient Statistics for the Cost of Climate Change

Derek Lemoine

NBER Working Paper No. 25008
Issued in September 2018
NBER Program(s):Environment and Energy Economics

I formally relate the consequences of climate change to time series variation in weather. First, I show that the effects of climate change on adaptation investments can be bounded from below by estimating responses to weather outcomes. The bound becomes tighter when also estimating responses to forecasts. Second, I show that the marginal effect of climate change on long-run payoffs is identical to the average effect of transient weather events. Instead of estimating the marginal effect of weather within distinct weather bins, empirical work should estimate the average effect of weather within each climate.

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Document Object Identifier (DOI): 10.3386/w25008

 
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