DP7572 The Long-Lived Effects of Historic Climate on the Wealth of Nations

Author(s): John Bluedorn , Akos Valentinyi , Michael Vlassopoulos

Publication Date: November 2009

Keyword(s): climate , economic performance , geography , history , temperature

JEL(s): N50 , O11 , O40 , O50 , O57

Programme Areas: International Macroeconomics

Link to this Page: www.cepr.org/pubs/dps/DP7572.asp

We investigate the long-run consequences of historic, climatic temperatures (1730-2000) for the modern cross-country income distribution. Using a newly constructed dataset of climatic temperatures stretching over three centuries (18th, 19th, and 20th), we estimate a robust and significant time-varying, non-monotonic effect of climatic temperature upon current incomes for a cross-section of 167 countries. We find a large, positive effect of 18th century climatic temperature and an even larger, negative effect of 19th century climatic temperature upon current incomes. When historic, climatic temperature is introduced, the effect of 20th century climatic temperature on current income is either weakly positive or insignificant. Our findings are robust to various sub-samples, additional geographic controls, and alternative income measures. The negative relationship between current, climatic temperature and current income that is commonly estimated appears to reflect the long-run effect of climatic variations in the 18th and 19th centuries.