Essays on weather, climate and development

This thesis examines the relationship between weather shocks, climate change and development. The research constituting this work thus lies at the intersection between environmental and development economics. Although it is by now generally acknowledged that it is the poor who will suffer most from the negative impacts of climate change, the literature on the relationship between climate change and development is still far from reaching definitive conclusions. In particular, from a macro point of view, the debate on the potential impacts of global warming on the growth rate of the economy, and not just on the level of output, is still unsettled. At the same time, research on the links between climate change and micro welfare dynamics, especially in developing countries, is scarce. Drawing from both the new climate-economy literature and the development literature on household growth and poverty traps, we address, at multiple scales of analysis, the research question of whether there is a causal relationship between weather shocks and economic growth. We specifically focus our attention on temperature shocks, because the ultimate aim is to provide policy guidelines on the future impacts of climate change. Although we cannot capture in our analysis long-run phenomena such as intensification effects and adaptation, we employ robust empirical methods and panel data so to infer from short-run elasticities and inform thinking about the impacts of long-run, permanent changes in climate. The main contribution of this thesis lies in its integrated, multi-level framework, able to provide empirical evidence and insights on the crucial links, still not well understood, between weather shocks, climate change, poverty and economic growth. More broadly, this work contributes to a deeper understanding of the much-debated historical relationship between climate and development. This thesis consists of three self-contained essays. Essay 1 investigates the relationship between weather shocks and the growth rate of total factor productivity (TFP), the key driver of long-run development, at the macro level. We look at TFP growth to shed light on whether climate change will affect the growth rate of the economy, as recently hypothesized in influential theoretical studies. If true, this would imply a radical upward revision of  I hereby declare that this thesis has not been and will not be submitted in whole or in part to another university for the award of any other degree. Material included in Essays 1 and 2 has been incorporated in two working papers co-authored with my advisors. However, I hereby state that the bulk of the original research presented in this thesis, including all the empirical applications in each of the following essays, is my own work. 2 current impact estimates. Using a sample of 60 countries covering the time span 1960-2006, we show that temperature shocks affected TFP growth significantly and negatively only in poor countries. This finding provides direct evidence of the dynamic effects of temperature shocks in poor countries. If such causal relationship between temperature, poverty and TFP growth will persist in the long-run, climate change in poor countries will affect not only the level of output, but also its growth rate through the TFP channel, thus further increasing concerns over inequality of future impacts. Essay 2 is a shift of perspective from the macro to the micro point of view. Specifically, the aim is to understand if the pattern of inequality of impacts observed at the macro level also holds withincountry, other than between-country. Here, using LSMS-ISA World Bank household panel data, we explore the short-run elasticities between weather shocks and consumption growth in rural Tanzania during the period 2008-2013. The core results are: i) temperature shocks slowed the convergence process among households and ii) the existence of critical poverty thresholds above which households are immune to temperature shocks. Furthermore, we also provide empirical evidence on the transmission channels (labour productivity and crop yields) responsible for the heterogeneity of impacts. Essay 3 is partially an extension of this approach, to make up for the short-run nature of the analysis in Essay 2. Research on micro growth dynamics in developing countries, in fact, is hampered by the lack of long household panels. Thanks to the creation of synthetic panels, we obtain a longitudinal panel of cohorts for rural Tanzania from 2000 to 2013. Using an ad hoc measure of household resilience to food insecurity developed by the Food and Agriculture Organization (FAO), we provide evidence that, despite the convergence process among households in rural Tanzania also holds in the long-run, temperature shocks still have a diverging effect for the least resilient households. We then show the existence of resilience thresholds that entail a bifurcation of impacts from temperature shocks on food consumption growth, which is particularly meaningful for adaptation policies in developing countries. On the whole, the core result of this work is a sharp and remarkable pattern of heterogeneity of impacts: temperature shocks only affect poorest households and countries. This finding, although consistent with most previous studies, goes beyond them by showing how the causal relationship between temperature, poverty and economic growth is deeper, more persistent and more extensive than previously thought, and may even be ubiquitous. This points to the paramount role played by development in dampening the effects of weather shocks on human welfare dynamics. Extrapolating from weather to climate, but also acknowledging the issue of external validity in doing so, our research suggests that climate change will cause, first and foremost, a fractal increase in 3 inequality, both between- and within-country: worse-off countries and households will be disproportionately affected by the negative impacts of global warming. Such a conclusion points to the importance of poverty reduction as a complementary strategy to greenhouse gas emission reduction and as a fundamental element of climate policy.