Tuesday, October 17, 2023

Several studies that claim heat suppresses economic growth fall apart under scrutiny; but the debunker thinks it is astonishing "that eminent economists, in universities with vast resources available to marshal evidence, chose to ignore [his] critique"

Climate Change and ‘Poor’ South Korea. By David Barker


A study claims heat suppresses economic growth. It falls apart under scrutiny.

The WSJ, Oct. 12, 2023

[Temperature Shocks and Economic Growth: Comment on Dell, Jones, and Olken https://econjwatch.org/File%20download/1287/BarkerSept2023.pdf?mimetype=pdf]

Climate change hurts the economy, according to a celebrated 2012 paper by economists Melissa Dell, Benjamin Jones and Benjamin Olken. That paper is in the top 1% of all academic economics publications by citation count, and it has received glowing coverage in the media. The authors teach at Harvard, Northwestern and the Massachusetts Institute of Technology, respectively, and have received some of the highest awards in the profession. I took a closer look at their study, and it doesn’t hold up.

The study claims that higher temperatures suppress economic growth in poor countries. The claim falls apart when you look at their definitions. The authors study the period 1961-2003 and assign each country a binary designation as “poor” or “rich” based on whether their per capita gross domestic product was below or above the median for countries in 1960.

But some countries faced drastic changes in fortune at the time.

South Korea is “poor,” according to the authors. In reality, it was very poor in the early 1960s and then became very wealthy. When I simply reclassified South Korea as poor from 1961-76 and rich from 1977-2003, the study’s results nearly disappeared. When I allowed classifications of all countries to change when they moved either above or below median GDP per capita, the results disappeared completely. Any study with results that collapse after such a simple specification change shouldn’t be published in a peer-reviewed academic journal.

I also found that unusual economic circumstances greatly influenced countries’ results. Per capita GDP in Rwanda dropped by 63% in 1994, the year of the genocide. That year happened to be warmer than average, tricking the model into showing that high temperatures cause GDP to fall. Dropping 16 unusual country/year observations out of 4,924 eliminated the main effect the study reported. Other seemingly arbitrary aspects of their technique, when changed, weakened or eliminated their results.

I extended their data from 2003 to 2017 and added additional countries to the sample. I found again that correctly classifying countries as poor or rich eliminated their results. Going back to their original data source, I discovered that monthly temperatures are available, although they used only annual temperature data. If high temperatures really reduce GDP growth, it seems likely that this effect would be greatest in the warmest months of the year. I found no evidence to support that hypothesis in the original or the extended data. I also used a completely different set of data on GDP by country and found no effect of temperature on growth.

Climate activists need evidence that high temperatures reduce economic growth to advance their policies. Responsible economists have found that high temperatures have only small effects on the level of GDP. If temperatures rise as the Intergovernmental Panel on Climate Change expects—assuming no CO2 mitigation at all—then according to responsible economists, global GDP in 2100 will be about 2.6% lower than if there was no temperature increase. With normal economic growth, GDP per capita in 2100 will be five times today’s level. A 2.6% reduction in GDP in 2100 would mean GDP growth of 4.9 times instead of 5—hardly a catastrophe. But if researchers claim to show that higher temperatures will affect the rate of GDP growth, then the effects of heat by the year 2100 could be significant. That is why pro-climate researchers are so desperate to find an effect of temperature on growth.

Econ Journal Watch, which published my debunking, contacted the authors and gave them an opportunity to respond to my work. They declined. [Reviewer: Same happened with previous papers in which this author claimed to have debunked other papers]

It is astonishing that eminent economists, in universities with vast resources available to marshal evidence, chose to ignore my critique. But the mainstream media will ignore anything that reveals the weaknesses of climate research, and academic journals will continue to publish shoddy research that confirms the dogma of climate hysteria.

Mr. Barker runs a real-estate and finance company. He has taught economics and finance at the University of Chicago and the University of Iowa and worked as an economist at the Federal Reserve Bank of New York.

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