The Global Geography of Long-Term Projected Macroeconomic Damages from Chronic Physical Risk: Aggregation Problem

Does the macro-level relationship between temperature and output comprehensively reflect the patterns observed sub-nationally? This Element quantifies heterogeneous productivity-growth responses to plausibly exogenous temperature and precipitation fluctuations using unbalanced panels over 1970-2018 (166 countries from Penn World Tables 10.01; >1,500 sub-national regions from MCC-PIK). It projects climate change-driven permanent damages to the level of GDP per capita by compounding physical risk-induced productivity-growth deviations over time. These transitory shocks are calculated by combining econometrically estimated response functions with an ensemble of NEX-GDDP CMIP6 simulations from 29 global climate models, which are extrapolated to 3,672 provinces covering 95% of global economic production. First, this study provides a basis for producing spatially disaggregated projections of climate-induced economic damages that consistently encompass most productive regions. Second, it shows that accounting for spatially granular climatic exposure and intra-country economic heterogeneity yields aggregated losses that alter the conclusions of previous global GDP models.