Estimating the Consequences of Climate Change from Variation in Weather
NBER Working Paper No. 25008
I formally relate the consequences of climate change to the time series variation in weather extensively explored by recent empirical literature. I show that reduced-form fixed effects estimators can recover the effects of climate if agents are myopic, if agents' payoff functions belong to a particular class, or if the actions agents take in each period do not depend on actions taken in previous periods. I also show how to recover structural estimates of climate change impacts from reduced-form weather regressions. Applying this new method, I find that an additional 2°C of global warming would reduce eastern U.S. agricultural profits by around 50% under the median estimates.
Document Object Identifier (DOI): 10.3386/w25008