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.
The authors thank Peter Klenow for helpful comments. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
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. citation courtesy of