Climate Change and Economic Growth in Nordic Countries: An application of smooth coefficient semi-parametric approach
Zeb, A.
Abstract:
The economic impact of climate change is usually measured as the amount by which the fluctuations in temperature in a given country can affect the output or GDP of the country in that period. This approach ignores the dynamic indirect effects of climate change on economic growth of a country. Ignoring the indirect growth effects of climate change will lead to a substantial underestimation of the impact of climate change on the future well-being of the countries. Therefore, in this paper we draw some attention to measure the indirect effects of climate change on economic growth. In order to empirically estimate the indirect effects of climate change on economic growth we use the data from the Nordic countries over the past four decade (1960-2000) and a newly developed smooth coefficient semi-parametric approach. Our analysis reveals several interesting results. Firstly, we find strong indication that the way the climate change indirectly affect the economic growth in these countries is highly non-linear. Therefore, any attempt for measuring the indirect effects of climate change on growth by using a linear estimation procedure such as Ordinary Least Square (OLS) procedure will produce biased results. Secondly, our smooth coefficient point-wise estimates of the capital share parameter indicate that the magnitude of the capital share parameter decreases with the increase in temperature.
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APA citation
- Zeb, A. (2013). Climate Change and Economic Growth in Nordic Countries: An application of smooth coefficient semi-parametric approach. International Journal of Social Sciences, II(3), 159–171.