Essays on the Impact of Weather on Economic Activity Open Access
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This dissertation contains three essays which explore pathways through which weather can impact economic activity and social outcomes. The first essay attempts to fill a gap in a growing literature examining the global economic implications of weather shocks. Past research has found significant, robust impacts of hotter temperatures on reducing economic growth. Level of rainfall has been shown to be important for agricultural production, but impacts on aggregate economic activity remain elusive. In this essay, it is argued that rainfall is a poor indicator of water availability, particularly in urban contexts. Instead, it is shown that changes in water runoff significantly impact economic growth. Specifically, in years in which runoff is significantly lower than average, local economic activity growth is depressed. This impact is strongest in middle income countries, where on average, a shock one standard deviation below normal levels reduces GDP growth by 0.5 percent, and 2 standard deviations below normal levels reduces GDP growth by 1.5 percent. Evidence is found for two potential mechanisms, agricultural production and hydropower dependence.The second essay tests if temperature anomalies around the time of birth can have long-term impacts on individuals’ economic productivity. Using unique data sets on historical weather and earnings, place and date of birth of all 1.5 million formal employees in Ecuador, it is found that individuals who have experienced in-utero temperatures that are 1°C above average are less educated and earn 0.9-1.8 percent less as adults. Results are robust to alternative specifications and falsification tests and suggest that warming may have already caused adverse long-term economic impacts. The third essay explores how rainfall variability impacts agricultural production along two margins: the intensity of output (yields) and the extensiveness of production, and how water infrastructure influences this relationship. Using global, gridded datasets, it is found that, on average, contemporaneous wet shocks tend to increase agricultural productivity. Contemporaneous dry shocks decrease crop productivity, while repeated dry shocks also tend to increase the rate of cropland expansion, perhaps as an adaptation technique to compensate for lower yields. It is shown that the theoretical underpinnings for these results can be found in the “safety-first” model, where the priority of the economic agent is to generate a threshold level of income or output. Further, using an instrumental variables based identification strategy for irrigation infrastructure, it is found that the buffering impact of upstream irrigation infrastructure varies by geography, climate, and income levels. Upstream irrigation infrastructure, in general, decreases the extent of cropland expansion to persistent dry shocks across different income levels, yet in developing countries, they appear to accentuate the adverse effects of dry shocks on agricultural productivity. One reason for this relationship which we find evidence for is mal-adaptation, where the presence of irrigation infrastructure incentivizes farmers to plant water-intensive crops.