Does Hotter Temperature Increase Poverty? Global Evidence from Subnational Data Analysis

Working Paper 2022-622

Abstract

Despite a vast literature documenting climate change negative effects on various socio-economic outcomes, surprisingly hardly any evidence exists on the global impacts of hotter temperature on poverty. Analyzing a new global panel dataset of subnational poverty in 139 countries, we find higher temperature to increase poverty. Our panel fixed effects model shows that a 1°C increase leads to a 9.1 percent increase in poverty, using the US$ 1.90 daily poverty threshold. The estimated poverty increase is lower at 5.2 percent for the long-differences model, which suggests potential long-run adaptation. Regional heterogeneity exists, with Sub-Saharan African and South Asian countries being most vulnerable to higher temperature. We find suggestive evidence that reductions in crop yields could be a key channel that explains the effects of rising temperature. Further simulation indicates that global warming effects could be more pronounced in poorer regions and under scenarios of higher greenhouse gas emissions without mitigation policies.

Authors: Hai-Anh H. Dang, Minh Cong Nguyen, Trong-Anh Trinh.