Climate change and economic growth: Evidence for European countries

G eine , Al ed; Bökemeie , Be ina; Owusu, Benjamin
A icle — Published Ve sion
Clima e change and economic g ow h: E idence o
Eu opean coun ies
Ame ican Jou nal o Economics and Sociology
P o ided in Coope a ion wi h:
John Wiley & Sons
Sugges ed Ci a ion: G eine , Al ed; Bökemeie , Be ina; Owusu, Benjamin (2024) : Clima e change
and economic g ow h: E idence o Eu opean coun ies, Ame ican Jou nal o Economics and
Sociology, ISSN 1536-7150, Wiley, Hoboken, NJ, Vol. 84, Iss. 2, pp. 323-359,
h ps://doi.o g/10.1111/ajes.12605
This Ve sion is a ailable a :
h ps://hdl.handle.ne /10419/319350
S anda d-Nu zungsbedingungen:
Die Dokumen e au EconS o dü en zu eigenen wissenscha lichen
Zwecken und zum P i a geb auch gespeiche und kopie we den.
Sie dü en die Dokumen e nich ü ö en liche ode komme zielle
Zwecke e iel äl igen, ö en lich auss ellen, ö en lich zugänglich
machen, e eiben ode ande wei ig nu zen.
So e n die Ve asse die Dokumen e un e Open-Con en -Lizenzen
(insbesonde e CC-Lizenzen) zu Ve ügung ges ell haben soll en,
gel en abweichend on diesen Nu zungsbedingungen die in de do
genann en Lizenz gewäh en Nu zungs ech e.
Te ms o use:
Documen s in EconS o may be sa ed and copied o you pe sonal
and schola ly pu poses.
You a e no o copy documen s o public o comme cial pu poses, o
exhibi he documen s publicly, o make hem publicly a ailable on he
in e ne , o o dis ibu e o o he wise use he documen s in public.
I he documen s ha e been made a ailable unde an Open Con en
Licence (especially C ea i e Commons Licences), you may exe cise
u he usage igh s as speci ied in he indica ed licence.
h p://c ea i ecommons.o g/licenses/by/4.0/
Am J Econ Sociol. 2025;84:323–359.
|
323
wileyonlinelib a y.com/jou nal/ajes
Recei ed: 1 July 2024
|
Accep ed: 27 Sep embe 2024
DOI: 10.1111/ajes.12605
ORIGINAL ARTICLE
Clima e change and economic g ow h: E idence
o Eu opean coun ies
Al edG eine
|
Be inaBökemeie
|
BenjaminOwusu
This is an open access a icle unde he e ms o he C ea i e Commons A ibu ion License, which pe mi s use, dis ibu ion and
ep oduc ion in any medium, p o ided he o iginal wo k is p ope ly ci ed.
© 2024 The Au ho (s). The Ame ican Jou nal o Economics and Sociology published by Wiley Pe iodicals LLC on behal o Ame ican
Jou nal o Economics and Sociology, Inc.
The pape was p esen ed a he i h ERMEES Mac oeconomics Wo kshop 2023: "The EU in he Age o Pe mac isis" on
Decembe 1, 2023, S asbou g (F ance).
Depa men o Business Adminis a ion
and Economics, Biele eld Uni e si y,
Biele eld, Ge many
Co espondence
Al ed G eine , Depa men o Business
Adminis a ion and Economics, Biele eld
Uni e si y, P.O. Box100131, Biele eld
33501, Ge many.
Email: [email p o ec ed]
Abs ac
Clima e change may a ec economies and he wel a e
o people a ound he wo ld. To design app op ia e
policy esponses, he economic e ec s o clima e
change should be known. One s and in he li e a u e
empi ically es ima es he g ow h e ec s o clima ic
a ia ions. Howe e , hose s udies o en neglec
economic a iables ha ha e p o en o be obus in
explaining economic g ow h. Fu he , o en hey ail o
check o he obus ness o hei esul s. The main aim o
his s udy is o de ec whe he he e exis s a s a is ically
signi ican obus ela ion be ween clima e change
and economic g ow h by es ima ing di e en model
speci ica ions. To do so panel es ima ion echniques o
24 Eu opean economies o he pe iod om 2002 o 2019
a e applied whe eby panel ixed e ec s es ima ions and
dynamic Gene alized Me hods o Momen s es ima ions
a e eso ed o. No s a is ically signi ican obus
ela ionship be ween he empe a u e change and
economic g ow h is ound jus as o p ecipi a ion ha
does no exe a signi ican e ec on g ow h. As ega ds
he ins i u ional and mac oeconomic con ol a iables
he ule o law, he iscal a iable, and he ou pu gap
a e s a is ically signi ican and obus . I is a gued ha
324
|
AMERICAN JOURNAL OF ECONOMICS AND SOCIOLOGY
INTRODUCTION
Mode n esea ch o de ec he o ces o economic g ow h using econome ic me hods s a ed in
he 1950s wi h a seminal pape w i en by Solow(1957) who implici ly builds on Tinbe gen(1942)
who was he i s o in eg a e a ime index in he agg ega e p oduc ion unc ion. Solow's g ea
me i was o show how a measu e o echnical p og ess can be es ima ed om eal- wo ld da a ac-
coun ing o ha pa o GDP g ow h ha is no explained by inc eases in capi al and labo inpu .
In he ollowing decades, nume ous empi ical s udies ha e been unde aken aiming o en-
hance he unde s anding o he p ocess o economic g ow h. Howe e , esea che s o en limi
hei analyses o a small numbe o explana o y a iables so ha he ques ion a ises o how
alid hei esul s a e. As ega ds ha p oblem Leame (1985) s a es ha “We mus insis ha
all empi ical s udies o e con incing e idence o in e en ial s u diness. We need o be shown
ha mino changes in he lis o a iables do no al e undamen ally he conclusions, no does a
sligh eweigh ing o obse a ions, no co ec ion o dependence among obse a ions, e ce e a,
e ce e a.” (Leame ,1985, p. 308). The e o e, Le ine and Renel (1992) pe o med an ex eme-
bounds analysis, based on Leame (1983), whe e hey in es iga e which a iables always exe a
s a is ically signi ican e ec in explaining economic g ow h, independen o which o he a i-
ables a e included in he eg ession.1 They ind ha only a ew a iables a e obus as de ined
by hem, such as he in es men sha e, ade, and he ini ial le el o GDP. Sala- i- Ma in(1997)
a gues ha he ex eme- bounds analysis is oo es ic i e since i allows only a ze o–one labeling,
ha is, a a iable is ei he obus o i is no . Ra he , he sugges s calling a a iable obus i 95% o
he densi y o an es ima ed coe icien lies o he igh o o he le o ze o. P oceeding like ha
he inds addi ional a iables o be obus such as poli ical a iables. B uns and Ioannidis(2020)
analyze whe he he o ces o economic g ow h change o e ime o emain he same indepen-
den o which ime pe iod is conside ed. They ind ha in e ences on g ow h de e minan s a e
no s able ac oss ime pe iods. Ne e heless, a iables such as in es men sha e and ade a e
s a is ically signi ican in he mo e ecen g ow h pe iod om 1960 un il 2010.
Besides economic and poli ical a iables, he na u al en i onmen and he clima e on ea h
can a ec he de elopmen o economies, oo. The global clima e, o i s pa , is e y likely a -
ec ed by he accumula ion o g eenhouse gases (GHGs) in he a mosphe e, like ca bon dioxide
(CO2), ni ous oxide (N2O), and me hane (CH4). An inc ease o GHGs in he a mosphe e aises
adia i e o cing leading o highe empe a u es on ea h wi h he ela ion desc ibed by an ap-
p oxima ely linea ela ionship. Bu , he adia i e o cing o ca bon dioxide, o example, is gi en
by he na u al loga i hm o ha GHG ela i e o he p e- indus ial le el and all o he GHGs can
be con e ed in o CO2 equi alen s, see G eine and Semmle (2008, p. 61), and o mo e de ails
he na u al science li e a u e ci ed he e.2 This implies ha he empe a u e does no ise linea ly
wi h a ising GHG concen a ion as e oneously s a ed by SRU(2019, p. 36). Howe e , e en i
a - eaching policy measu es, such as he ne ze o goal
o he Eu opean Union, should be gi en only based on
obus esul s. O he wise, economic policy may u n ou
o be inadequa e and can lead o wel a e losses. Hence,
he conclusion is ha he ne ze o goal o he Eu opean
G een Deal is o be seen skep ical.
|
325
CLIMATE CHANGE AND ECONOMIC GROWTH
he e is e y s ong e idence ha he accumula ion o GHGs aises he a e age su ace empe a-
u e on he ea h (e.g., A ias e al.,2021), i mus be s a ed ha he clima e sys em is an ex emely
complex sys em such ha he e is s ong unce ain y as ega ds i s sensi i i y wi h espec o
highe GHGs (c . Meinshausen e al.,2009, 2011, sec ion4.1.3; She wood e al.,2020). A simple
example is p o ided by G eine and Semmle (2005) who ha e shown ha eedback mechanisms
a ec ing he Albedo o he ea h can lead o mul iple equilib ia in a s anda d g ow h model,
whe e a ze o- dimensional clima e module had been in eg a ed. This means ha he a e age su -
ace empe a u e does no con e ge o i s new ela i ely low equilib ium alue, bu o he high
equilib ium alue, once a ce ain empe a u e h eshold is passed.
Fu he , clima e model models o en epo an inc ease in empe a u es ha a e no com-
pa ible wi h he ac ual empe a u e changes as poin ed ou by Voosen(2022) who ci es a U.N.
epo inding ha esul . Tha may be ela ed o he ac ha models o he Coupled Model
In e compa ison P ojec Phase 5 (CMIP5) do nei he conse e mass no ene gy as shown by
I ing e al.(2021). This implies ha hey iola e he i s law o he modynamics, a undamen al
p inciple in physics. As ega ds CMIP6 models hese ha e imp o ed in some espec s, bu , a e
wo se o o he s o li le changed.3 Hence, he ou come o s udies ha o ecas d ama ic e ec s
and ha a e based on some o he nex - gene a ion clima e models ha p edic a as empe a u e
inc ease should be conside ed wi h ca e. In pa icula , he eedback e ec s o clouds ha s ongly
a ec empe a u es a e no ye unde s ood and cause g ea unce ain y in clima e models (e.g.,
Fu ado e al.,2023; Hill e al.,2023; Mülmens äd e al.,2021). Model unce ain y also esul s
om he unp edic abili y o olcano e up ions and om he complexi y o p ocesses linking he
e up ion o he clima e esponse (c . Chim e al.,2023; Zanche in,2023). These conside a ions
demons a e ha he e is g ea model unce ain y as ega ds he clima e sys em o he ea h and
one should be ca e ul when using he ou come o hose models o policy ecommenda ions.
Despi e hose high unce ain ies wi h espec o he clima e models, changes in he clima ic
condi ions may in luence he economic sys em o socie ies. Fo example, mo e ex eme wea he
e en s cause economic damages and equi e esou ces ha canno be used o consump ion and/
o o in es men , al hough i mus be no ed ha he empi ical e idence o mo e ex eme e en s
is small, wi h he excep ion o hea wa es (see Ranasinghe e al.,2021, p. 1856, able12.12, col-
umn 3, Alimon i & Ma iani,2023; Zhang e al.,2023, and simila Lombo g,2020). Ne e heless,
a he 21s Uni ed Na ions Clima e Change Con e ence in 2015, 196 pa ies adop ed he so- called
Pa is Ag eemen ha aims o educe ne emissions o GHGs o ze o in he second hal o his
cen u y, ha is, o each a balance be ween emissions by sou ces and emo als by sinks (ne
ze o). Al hough legally binding he e a e no sanc ions in case coun ies ail o each he ne ze o
posi ion (see Uni ed Na ions,2015, A . 15). To comply wi h he Pa is Ag eemen , he Eu opean
Union (EU) s i es o be he i s clima e- neu al con inen and passed he G een Deal in which
i s a es ha he ne ze o goal is o be achie ed by 2050 in he EU.4
Howe e , om an economic poin o iew, i is doub ul whe he his goal is bene icial o he
people in he EU om a wel a e heo y poin o iew. This holds because he ne ze o goal is e y
a - eaching going along wi h emendous cos s. The e o e, i is indispensable o know whe he
and i so how clima e change a ec s he economic e olu ion o EU coun ies and whe he his
ela ionship is obus . I is a gued ha a - eaching goals, such as he ne ze o goal, should be
pu sued only i he e is s ong e idence ha nega i e e ec s exis and ha he bene i s o elimi-
na ing hem ou weigh he cos s.
The pu pose o his s udy is o con ibu e o he esea ch on he e ec s o global wa ming
wi h espec o he economic de elopmen o EU coun ies. The objec i e is o ind whe he
he e exis s a s a is ically signi ican and obus e ec o global wa ming on economic g ow h in
326
|
AMERICAN JOURNAL OF ECONOMICS AND SOCIOLOGY
Eu opean coun ies and, based on he esul s, o mula e policy implica ions. Thus, he esea ch
ques ion is: Does global wa ming a ec economic g ow h in EU coun ies and is he ela ionship
obus agains di e en model speci ica ions and es ima ion me hods. To do so 24 EU coun ies
om 2002 o 2019 a e analyzed which, o he bes o ou knowledge, is he i s s udy ha ana-
lyzes his opic o hose Eu opean economies.
When one de ines clima e change as a phenomenon ha co e s decades, he conside ed
ime pe iod seems o be sho and one possibly should speak o clima e a iabili y ha is ana-
lyzed in ou pape . This should be kep in mind and can be seen as a limi a ion o ou analysis.
Ne e heless, he e is a posi i e end in he empe a u es e en o e ha pe iod. The ising em-
pe a u es could a ec economic g ow h and i is his opic ha we in end o add ess in his s udy.
The es o he pape is o ganized as ollows. Sec ion “C i ical Li e a u e Re iew” gi es a c i -
ical li e a u e e iew o he s udies ha analyze he e ec s o clima e change on he e olu ion
o economies. Sec ion “Empi ics and Econome ic Es ima ions” p esen s he empi ical se up,
beginning wi h an o e iew o he da a and o he models. Fu he , he a ious model speci i-
ca ions and eg ession es ima es a e p o ided and discussed in he subsec ions. Sec ion “Policy
Implica ions” p o ides he policy implica ions and Sec ion “Conclusion”, inally, concludes he
pape .
CRITICAL LITERATURE REVIEW
In gene al, i can be expec ed ha changes in he clima e show e ec s on he g ow h a es o
agg ega e GDP. Howe e , he unce ain y ega ding he economics o clima e change may
be s ill la ge han o he clima e models which is e lec ed by he wide ange o es ima es
o clima e- ela ed damages. This holds o speci ic sec o s in he economy (e.g., Neumann
e  al., 2020; Noce a e  al., 2015) and o he mac oeconomy as well (c . Bo zen e  al., 2019;
Kelle & Nicholas,2015; No dhaus & Mo a ,2017). Fo example, No dhaus and Mo a (2017)
es ima e damages o global wa ming o amoun o 2.04 (±2.21) pe cen o income when he
a e age global su ace empe a u e ises by 3°C. Newell e al.(2021) s a e ha he e is la ge
model unce ain y as ega ds he e ec o global wa ming on he mac oeconomy. They use c oss-
alida ion o e alua e 800 model speci ica ions whe e hey use GDP g ow h and, al e na i ely,
he le el o GDP as he dependen a iable ha is explained by he empe a u e, by he change
o he empe a u e, by p ecipi a ion, by ime ixed e ec s, and by coun y- speci ic ime ends.
They ind ha g ow h models a e associa ed wi h la ge unce ain ies e lec ed by he ac ha
he 95% con idence in e al o GDP impac s in 2100 anges om GDP losses o 84% o gains
o 359%. GDP le el models, howe e , go along wi h less unce ain y and ha e a smalle 95%
con idence in e al be ween −8.5% and +1.8%, cen e ed a ound losses be ween 1% and 3%. On
he o he hand, highe GHG emissions may be associa ed wi h highe economic g ow h as shown
by Ba ancea e al.(2023). Those au ho s de ec a posi i e and s a is ically signi ican ela ion
be ween economic g ow h and ni ous dioxide emissions o a panel o 50 coun ies om 1970 o
2020. O e all, he e exis qui e a many empi ical con ibu ions analyzing he impac o clima e
on economic ac i i y and ou pu . They a e no epo ed in de ail, bu , i is only e e ed o he
exhaus i e su ey o app oaches and pape s by Kols ad and Moo e(2020).
Those s udies, howe e , o en ocus on only one po en ially ele an bundle o physical ac o s
while neglec ing economic a iables ha ha e u ned ou o be impo an in explaining economic
g ow h, hus, gi ing ise o he p oblem o omi ed a iables. F om an econome ic poin o iew,
his can lead o inconsis en es ima ions o he coe icien s when he explana o y a iables a e

|
327
CLIMATE CHANGE AND ECONOMIC GROWTH
co ela ed wi h he esiduals. E en i ha p oblem can be o e come echnically in ixed e ec s
panel eg ession models by in oducing dummies, he p oblem o missing economic a iables
emains such ha he es ima ed model may no be a good p oxy o he ue da a- gene a ing
p ocess and may no yield he ue e ec o clima e a iables. Ba ke (2022) p o ides an exam-
ple showing ha he ela ion be ween economic g ow h and empe a u e change, de ec ed in a
g ow h eg ession, does no u n ou o be obus . He es s he ou come o he pape by Colaci o
e al.(2019) and shows ha he emo al o a small numbe o obse a ions d as ically changes
he quali a i e e ec o clima e change on economic g ow h. Thus, he emo al o da a be o e
1990 would ha e aised he es ima e by almos h ee imes implying ha global wa ming would
nea ly elimina e economic g ow h in he Uni ed S a es. Fu he , allowing o non- linea i ies
may change he ou come, oo, and can lead o posi i e g ow h e ec s o highe empe a u es, as
shown in de ail by Ba ke (2022). This demons a es ha he es ima ion esul s may be sensi i e
wi h espec o he da a and wi h espec o he es ima ion me hod. The same holds o missing
economic a iables. In ma ke economies, he g ow h o agg ega e GDP is he esul o decisions
o indi iduals and i ms ha ac in en ionally o achie e economic goals. Hence, econome ic
models explaining g ow h should be based on sound economic heo y and con ain economic
explana o y a iables, as al eady ehemen ly demanded by Rosen(2019). I economic a iables
exe a s a is ically signi ican e ec on economic g ow h and a e no included in he es ima ion
hei e ec may be e lec ed by he coe icien s o he clima e- ela ed a iables and, hus, dis o
hei ue e ec s.
Two o he equen ly ci ed pape s a e he con ibu ions by Dell e  al. (2012) and Bu ke
e al.(2015). Dell e al.(2012) eg ess annual g ow h on annual a e age empe a u es, wi h a
sample o obse a ions on 127 coun ies om 1961 o 2003 and ind a s a is ically signi ican
nega i e e ec o highe empe a u es on economic g ow h in poo coun ies wi h income below
he median, while he e ec o ich coun ies is insigni ican . Bu ke e al.(2015) use annual da a
ep esen ing 166 coun ies om 1961 o 2010 on empe a u e and economic g ow h and ind
ha 77% o all coun ies would be poo e wi h empe a u e inc eases han wi hou inc eases,
and 5% o coun ies would be poo e in 2100 han hey a e oday because o highe empe a-
u es. Howe e , hose pape s ha e se ious laws as demons a ed by Ba ke (2023, 2024). Thus,
he pape by Dell e al.(2012) uses an un enable me hod o classi ying coun ies by income and
he esul s a e in luenced by a bi a y me hodological choices and by a small numbe o obse -
a ions wi h unusual cha ac e is ics. The pape by Bu ke e al.(2015) has been shown o “bu y
incon enien esul s, use misleading cha s o con use eade s, and ail[s] o epo ob ious o-
bus ness checks. Simula ions sugges ha he s a is ical signi icance o hei esul s is in la ed.”
(Ba ke ,2024, p. 66).
Ano he aspec ha should be poin ed ou is ha policies aiming o educe GHG emissions
may in luence economic a iables, oo. Fo example, Kap hamme (2023) inds ha ca bon
axes in Scandina ian coun ies educe emissions, bu , go along wi h ad e se e ec s on eco-
nomic ac i i y. Känzig(2023) comes o he conclusion ha highe pe mi p ices in he EU ETS
leads o a pe sis en inc ease in consume p ices and o a empo a y, bu subs an ial decline
in economic ac i i y. Howe e , i mus be unde lined ha hose ou comes a e no obus .
Thus, Be na d and Kichian(2021) do no ind a signi ican impac o he ca bon ax in B i ish
Columbia on GDP and Me cal and S ock(2020) ind no obus e idence ha ca bon axes in
Eu opean coun ies educe employmen o GDP g ow h. An impo an aspec when analyz-
ing he e ec s o iscal a iables is ha he pe iod budge cons ain o he go e nmen should
be aken in o accoun . This holds because a ia ions in one iscal a iable imply ha ano he
is a ec ed, oo. Bu , o a oid he p oblem o mul i- collinea i y one a iable mus be d opped
328
|
AMERICAN JOURNAL OF ECONOMICS AND SOCIOLOGY
and i should be ha one whe e heo y p edic s ha i does no a ec he dependen a iable,
see Knelle e al.(1999, pp. 174–175). In public inance e ms his means ha looking a he
speci ic incidence o a ax does no yield a eliable pic u e o i s g ow h e ec s. Ra he , he
analysis should ocus on he budge incidence.
In he nex sec ion, he es ima ion s a egy and he esul s a e epo ed.
EMPIRICS AND ECONOMETRIC ESTIMATIONS
Wi h his pape , i is in ended o con ibu e o his s and o li e a u e. Di e en models a e es i-
ma ed in a panel se - up using sui able econome ic echniques whe e clima e a iables and clas-
sical mac oeconomic g ow h de e minan s a e allowed. Since i is in ended o explo e he e ec
o clima e change on economic g ow h, he g ow h a e o eal GDP pe capi a is he dependen
a iable o all he es ima ions, while he clima e a iables, as well as he s anda d mac oeconomic
con ol a iables, a e he explana o y a iables on he igh - hand side o he eg ession equa ions.
Se e al speci ica ions ha e been es ima ed, whe e he esul s below e e o he annual, 3 and
5 yea s g ow h a e, espec i ely. This allows o cap u e a b oade pe spec i e on he g ow h a e,
he immedia e o sho e m as well as he medium and long e m e ec by di iding he whole ob-
se a ion pe iod in o sub- pe iods. O e lapping in e als a e cons uc ed so ha he es ima ions
can be done wi hou loosing explana o y powe o s eng h in e ms o a ailable obse a ions.
Rega ding he g ow h a e G a ime , h ee di e en in e als a e conside ed (5 yea s l = 5, 3 yea s
l = 3, and 1 yea l = 1), ha is
yi, −yi, −l
wi h y deno ing he na u al loga i hm o eal GDP pe
capi a, implying ha he ques ion o how he clima e a iables and he con ol a iables a ec
he ela i e change o GDP in yea compa ed o
−l
a e analyzed, see Woo and Kuma (2015)
o Boekemeie and G eine (2015) o a simila app oach o ins ance. Fo example, o l = 3, he
in e als a e
yi, −yi, −3
,
yi, +1−yi, +1−3
,
yi, +2−yi, +2−3
, and so on.
Da a o e iew
The s udy is conduc ed o a panel o 24 Eu opean coun ies and he da a e e o annual equency.5
The da a ha e been ob ained om se e al es ablished da a sou ces and co e he yea s om 2002
o 2019. Rega ding he wea he da a, he ime se ies ha e been aken om he Wo ld Bank Clima e
Change Knowledge Po al (Wo ld Bank,2023b). I is ERA5 ( eanalysis) da a on a e age ai em-
pe a u es and a e age p ecipi a ion coun y- wise. Since he ime se ies should be s a iona y o a oid
spu ious es ima es he g ow h a e o he empe a u e is used in he model as a p oxy o he em-
pe a u e inc ease due o global wa ming. Addi ionally, da a o p ecipi a ion as ano he clima e
a iable a e used ha we e ob ained by he Wo ld Bank Clima e Change Knowledge Po al, oo.
The da a o he o he mac oeconomic a iables ha e been aken om he AMECO homepage
(AMECO,2021), such as he eal GDP pe capi a se ies o he g ow h a e, which gi es he depend-
en a iable. Rega ding he explana o y a iables he deb o GDP a io as a iscal pa ame e was
eso ed o, and he ade a iables p oxied by he “ e ms o ade” index which ep esen s he a io
o expo s o impo s. The ou pu gap was ob ained om AMECO and ep esen s he ac ual GDP
less he po en ial GDP. The in es men e ec is aken in o accoun by u ilizing he g oss ixed capi al
o ma ion ela i e o GDP. In la ion is measu ed by he change in he consume p ice index (CPI).
The a iable “ ule o law” is used as he ins i u ional a iable and has been ob ained om he Wo ld
Bank Wo ldwide Go e nmen Indica o s (Wo ld Bank,2023a).
|
329
CLIMATE CHANGE AND ECONOMIC GROWTH
Figu e1 p esen s he a e age empe a u e plo o EU coun ies be ween 1970 and 2019. Gene ally,
a g adual upwa d end can be obse ed o almos all he coun ies indica ing a sligh ise in a e age
empe a u es o e he chosen ime pe iod. Figu e2 depic s he p ecipi a ion o he coun ies in he
sample. Tha a iable does no exhibi any pa icula end o all coun ies. In Figu e3, coun y-
wise sca e plo s a e gene a ed o examine he ela ionship be ween GDP g ow h and empe a u e
g ow h wi h a linea i . The ela ionship is mixed wi h he da a showing a weak nega i e ela ion-
ship be ween GDP g ow h and empe a u e g ow h o some coun ies such as Finland, Hunga y,
and I aly. On he o he hand, he e is a weak posi i e ela ionship be ween Belgium, I eland, and
Po ugal. The ela ionship be ween he plo s is no ob ious o mos o he coun ies conside ed.
Nex , he s a iona i y o he a iables is es ed o ensu e ha he es ima es do no emana e
om spu ious eg ession. Hence, s anda d panel da a uni oo es s, he Im, Pesa an, and
Shi (IPS) and Le in, Lin, and Chu es (LLC), a e applied o all he a iables and he esul s
a e epo ed in TableA3 in he appendix.6 The null hypo hesis o bo h es s is ha he se ies
is non- s a iona y (uni oo ). F om he able, i can be seen ha he e is enough e idence
(based on p- alues) o ejec he null in a o o s a iona i y o he log o p ecipi a ion, o
he empe a u e g ow h a e, he deb a io, ade, he ou pu gap, in la ion, GDP g ow h, and
o he ule o law. In he case o he in es men - o- GDP a io, he LLC es con i ms s a ion-
a i y. Addi ionally, we conside a uni oo es ha accoun s o c oss- sec ional dependence
in he panel da a known as he c oss- sec ionally augmen ed Im, Pesa an, and Shi es (CIPS).
The esul s o he CIPS es can also be ound in TableA3 wi h he null hypo hesis indica ing
a uni oo while he al e na i e hypo hesis s a es he absence o a uni oo . Based on he
p- alues, s a iona i y canno be con i med o he deb - o- GDP a io, he ou pu gap, in es -
men , in la ion, and he ule o law. The esul s o he CIPS uni oo es a e a odds wi h he
IPS and he LLC es . Howe e , in wha ollows in he model es ima ion sec ion, we show ha
c oss- sec ional dependence (CSD) is no a p oblem because he esul ing model esiduals do
no exhibi e idence o CSD a e an econome ic es is conduc ed. Fu he , we plo ed he
coun y- wise esiduals o he es ima ed models which did no show e idence o CSD.
Figu eA1 in he appendix p esen s a co ela ion ma ix ha e eals he co ela ion coe i-
cien s be ween he a iables. The ou pu gap and in la ion bo h ha e a high posi i e co ela ion
wi h GDP g ow h. Rega ding he clima e a iables, empe a u e g ow h has a low posi i e coe -
icien wi h GDP g ow h while p ecipi a ion co ela es nega i ely. The ule o law, he deb , and
he in es men a io co ela e nega i ely wi h GDP g ow h. To u he asce ain he impac o all
a iables on GDP g ow h, panel eg essions a e pe o med. Fu he , in TableA9 in he appendix,
we compu e he a iance in la ion ac o (VIF) demons a ing ha he e is no e idence o mul-
icollinea i y be ween he a iables in ou models.
The summa y s a is ics can be ound in TableA2 in he appendix. The mean, he maximum,
and he minimum alues o all he a iables a e p esen ed. I can be no iced ha he deb - o-
GDP a io has he highes a iabili y (s anda d de ia ion), ollowed by he e ms o ade and he
ou pu gap. Addi ionally, he skewness es is p esen ed which indica es ha he dis ibu ion o
he empe a u e g ow h, he e ms o ade, and in la ion ha e hea ie ails and sha pe peaks
as compa ed o he no mal dis ibu ion. Finally, we epo on he Ja que–Be a s a is ic wi h i s
co esponding p obabili y alues. The p- alues indica e a ejec ion o he null hypo hesis o no -
mali y o he dis ibu ion o he a iables. Howe e , his is no p oblema ic since he econome ic
models used o his esea ch do no equi e he da ase s o be no mally dis ibu ed.
Be o e analyzing he app op ia e econome ic models and he es ima ions in he subsequen
subsec ion, a ba e y o panel econome ic es s is conduc ed o ensu e ha he es ima ed models
a e app op ia e and sound. To begin wi h, a panel linea model is speci ied and he p esence o
330
|
AMERICAN JOURNAL OF ECONOMICS AND SOCIOLOGY
indi idual and ime e ec s in he da a is es ed (see TableA4 in he appendix o he model spec-
i ica ion and o he esul s o he es ). The F- es is applied whe e a model wi h nes ed OLS is
compa ed o a panel ixed e ec s wi hin he es ima o . The null hypo hesis o he es indica es
he absence o he e ec s (indi idual, ime, o bo h). The esul suppo s he app op ia eness o
he model wi h bo h indi idual and ime e ec s based on he p- alues o he esul ing hypo hesis
es which implies he ejec ion o he null. Nex , an econome ic model is speci ied ha consid-
e s bo h indi idual and ime e ec s ( wo- way model). F om an economic poin , his is jus i iable
since he ime span o he da a co e s he inancial and deb c isis, which a ec ed Eu opean
economies s ongly so ime e ec s should no be neglec ed in he model.
Subsequen ly, he pooling o he model pa ame e s is es ed ac oss he c oss- sec ion o he
panel using he Chow es (based on he F- es o s abili y). This is necessa y because he assump-
ion ha pa ame e s in a panel da a se ing can be pooled e lec s a s ingen es ic ion which
could lead o biased es ima es i he pooled model assump ion does no hold (see Bal agi,2021).
Rega ding he pooling es a es ic ed model which consis s o linea ixed e ec s wi h a iable
in e cep (bu wi h iden ical slope coe icien ) is compa ed o an un es ic ed model made up o a
panel a iable coe icien model ( a iable in e cep and a iable slope). The null hypo hesis indi-
ca es model s abili y o compa abili y o bo h models. The esul s o he es can be ound in he
le panel o TableA5 (in he appendix designa ed ixed e ec s (a)). The esul s indica e a ejec ion
o a pooled slope pa ame e based on he p- alue o he hypo hesis, implying ha a model wi h
one homogeneous pa ame e es ima e is no easible. Nex , he e ogenei y in he da a is explo ed
and accoun ed o and coun y dummies a e cons uc ed based on he empe a u e g ow h a i-
able o augmen he model. Tha is done o accoun o he e ogenei y in he model o aid he pool-
ing o he slope pa ame e . Based on Figu eA5, he model is augmen ed wi h dummy a iables
o Finland, Sweden, and Es onia since hese coun ies ha e he mos a ia ions in empe a u e
g ow h. The igh panel o TableA5 (designa ed ixed e ec s (b)) depic s he esul s o he pool-
ing es which ails o ejec he null hypo hesis o model s abili y indica ing ha he augmen ed
FIGURE 1 A e age empe a u e o EU coun ies.
|
337
CLIMATE CHANGE AND ECONOMIC GROWTH
gap. Wi h his es ima ion, in es men in Mod 2 indica es o ha e a g ow h- enhancing e ec ,
while he ule o law again exe s a nega i e e ec isible in Mod 3. The o he a iables a e
no s a is ically signi ican .
Fo he las pa o Table2 wi h he 5 yea s g ow h a es mos es ima ion esul s suppo he
3 yea s g ow h esul s: again, he e is ine ial beha io o he g ow h a e ha has a posi i e
impac on subsequen g ow h and a s a is ically signi ican posi i e e ec on he ou pu gap.
Fu he , he e ec o he ins i u ional a iable u ns ou o be s a is ically signi ican and nega-
i e. Wi h he 5 yea s g ow h speci ica ion, mos o he o he mac o a iables emain insigni ican
in bo h models. And, as in he linea ixed e ec s es ima ion abo e, ega ding he en i onmen al
a iables empe a u e change is only signi ican ly posi i e in he speci ica ion o Mod 1, while
p ecipi a ion exe s a signi ican posi i e e ec on economic g ow h in Mod 1 and Mod 2.
Resuming hese indings demons a es again ha he e does no exis a clea - cu ela ionship
be ween economic g ow h and clima e change. The es ima ions e eal no dis inc uni o m signi -
ican g ow h e ec in he sho un ac oss/ h oughou he speci ica ions and he e ec emains
insigni ican o e en swi ches be ween posi i e and nega i e in he long un and in he medium
un, espec i ely. I should be added ha ini ially di e en speci ica ions o a a iable we e in-
cluded cap u ing he e ec o he ini ial le el o eal GDP pe capi a. Howe e , ha did no u n
ou o be signi ican so i was decided o un he eg essions wi hou ha a iable. Ou comes on
hese es ima ions a e a ailable on eques .
Fu he , a simila model has been es ima ed, howe e , wi h he lagged empe a u e g ow h
as he co a ia e o in e es (depic ed in TableA7 in he appendix). The main esul —o mixed
empi ical e idence—does no di e om he cen al es ima es in Table2. The en i onmen al
a iables exe di e en s a is ically signi ican e ec s on g ow h, in he 1 yea g ow h speci ica-
ions empe a u e indica es a nega i e e ec in Mod 1 and Mod 2, while he e ec u ns posi i e
in Mod 2 and Mod 3 in he 3 yea s g ow h in e al and becomes insigni ican in he 5 yea s eco-
nomic g ow h se ing. Like in Table2 p ecipi a ion a ec s g ow h posi i ely once i is signi ican .
Hence, TableA7 con i ms ha he es ima es a e qui e obus , i espec i e o whe he he imme-
dia e e ec o he empe a u e g ow h o he lag o he empe a u e g ow h is used.
The esul s o he Sa gan es o o e iden i ying es ic ion a e epo ed. Based on he p-
alues, he null hypo hesis which indica es he alidi y o he ins umen s, canno be ejec ed
poin ing o he ac ha he ins umen s a e alid. Addi ionally, he A ellano- Bond second-
o de au oco ela ion es which e eals he absence o au oco ela ion based on he p- alues
is epo ed in he able. The p- alues imply a non- ejec ion o he null hypo hesis o no au-
oco ela ion o all model speci ica ions. Finally, he esiduals o he dynamic models a e
inspec ed o e idence o CSD which may dis o he s anda d e o s and, hence, a ec in e -
ence in he models. The coun y- wise esiduals o all he model speci ica ions a e plo ed and
shown in Figu esA2–A4 demons a ing ha he esiduals o each coun y a e unique and do
no exhibi a esemblance be ween coun ies. Hence, i is a gued ha he e is no e idence o
CSD in he esiduals.
Pa ialling ou he e ec s o he con ol a iables—Applica ion o he
F isch–Waugh–Lo ell heo em
In wha ollows, i is deemed signi ican o s udy he ela ionship be ween only economic g ow h
and he change in empe a u e since p ecipi a ion has been ound o be insigni ican in all p e-
ious es ima ions. The e o e, he e ec o a change in he empe a u e on economic g ow h is

338
|
AMERICAN JOURNAL OF ECONOMICS AND SOCIOLOGY
es ima ed while he e ec s o he o he mac oeconomic and ins i u ional a iables a e con olled
o . To do so he F isch–Waugh–Lo ell (FWL) heo em is applied (see F isch & Waugh,1933;
Lo ell,1963) o causal in e ence which en ails pa ialling ou he e ec s o all he con ol a i-
ables when es ima ing he e ec o clima e change on economic g ow h. The aim is o isola e
he e ec o he con ol a iables on he a iables o in e es so ha i is possible o examine
he e ec o only he change in he empe a u e on economic g ow h. This simpli ies he inal
model es ima ion and enables us o ob ain he ue ela ionship be ween he a iables wi h sim-
ple in e p e abili y. A wo- s ep p ocedu e is implemen ed as ollows: in he i s s ep panel GMM
(A ellano and Bond es ima o ) is used o pa ial ou he e ec s o all con ol a iables on GDP
g ow h and on he empe a u e g ow h, in he second s ep he esiduals om he eg ession o
g ow h on he con ol a iables a e eg essed on he esiduals ob ained om he eg ession o he
empe a u e change on he con ol a iables.
The i s speci ica ion, he eg ession o g ow h on he con ol a iables, looks as ollows,
The jus i ica ion o using panel GMM o he i s s ep is due o possible ine ia o he de-
penden a iable, he g ow h a e. Equa ion(3) depic s a eg ession o he GDP g ow h a e on
all con ol a iables wi h he excep ion o he empe a u e g ow h. The esidual eco e ed is
depic ed by

Gi,
. Simila ly, he e ec s o all con ol a iables on he empe a u e g ow h wi h he
omission o he GDP g ow h a e a e pa ialled ou in he ollowing eg ession,
Once again panel GMM is used o es ima e he speci ica ion (4) and o eco e he esiduals
deno ed by

Ti
. In he second inal s ep, he GDP g ow h esiduals a e eg essed on he empe a-
u e g ow h esiduals o ob ain he e ec o he change in empe a u e on economic g ow h using
panel ixed e ec s es ima ion wi h he ollowing speci ica ion,
The use o he panel ixed e ec s es ima ion in he second s ep is jus i ied by he ac ha he
ine ia o he g ow h a iables has been pa ialled ou . Hence, one p oceeds wi h a s anda d lin-
ea ixed e ec s model o he es ima ion.
Table3 p esen s he ou pu a e he wo s eps pa ialling ou he p ocedu e acco ding o he
FWL heo em. Again, a mixed esul can be obse ed om he able. Using he GDP g ow h wi h
1- yea g ow h in e als as he dependen a iable in he i s s ep p ocedu e, one ob ains a neg-
a i e signi ican e ec o he empe a u e g ow h on economic g ow h. Howe e , a 3- yea GDP
g ow h in e al shows an insigni ican ela ionship. Simila ly, a 5 yea g ow h in e al does no
yield a signi ican e ec o he change in empe a u e on economic g ow h.
Fu he , a simila model wi h he lagged empe a u e g ow h as he co a ia e o in e es has
been es ima ed (depic ed in TableA8 in he appendix). Quali a i ely, he esul s a e iden ical
(3)
G
i, =𝛼i+𝛾 +𝜋Gi, −1+𝜃Pi, +
m
∑
j
=
1
𝜙CVj
i, +
3
∑
h
=
1
𝛾hDh+Ui,
(4)
T
i, =𝛼i+𝛾 +𝜋Ti, −1+𝜃Pi, +
m
∑
j
=
1
𝜙CVj
i, +
3
∑
h
=
1
𝛾hDh+Ui,
(5)

Gi,
=

T
i
+noise
i,
|
339
CLIMATE CHANGE AND ECONOMIC GROWTH
TABLE 2 Dynamic panel model es ima ion.
Va iables
1 yea g ow h in e al 3 yea g ow h in e al 5 yea g ow h in e al
Mod 1aMod 2bMod 3cMod 1aMod 2bMod 3cMod 1aMod 2bMod 3c
Lagged GDP
g ow h
0.4564** −0.4297*** −0.4643*** 1.4688*** 0.2200*** 0.2139*** 1.0654*** 0.4187*** 0.4824***
(0.1736) (0.0435) (0.0802) (0.0797) (0.0552) (0.0424) (0.0759) (0.0635) (0.0729)
Temp g ow h 0.0216*0.0007 −0.0098 −0.0271 −0.0506** −0.0334*** 0.080** −0.0427 −0.0289
(0.0128) (0.0057) (0.0128) (0.0347) (0.0209) (0.0122) (0.0332) (0.0324) (0.0279)
P ecipi a ion 0.0127 0.0032 −0.0046 0.0395 0.0434** 0.0347*0.0539** 0.0303** 0.0053
(0.0171) (0.0080) (0.0111) (0.0338) (0.0186) (0.0193) (0.0213) (0.0145) (0.0202)
Lagged deb a io 0.0017*** 0.0010** 0.0017** 0.0008** 0.0011 0.0003
(0.0005) (0.0004) (0.0007) (0.0003) (0.0007) (0.0005)
T ade 0.0967 0.3690** −0.3418 −0.2312 −0.7361** −0.0638
(0.1920) (0.1868) (−0.3418) (0.1713) (0.3669) (0.2752)
Ou pu gap 0.0136*** 0.0138*** 0.0237*** 0.0203*** 0.0194*** 0.0175***
(0.0016) (0.0021) (0.0026) (0.0023) (0.0024) (0.0032)
In la ion 0.0136 0.0946 −0.0983 −0.0064 −0.0733 0.1254
(0.0967) (0.0965) (0.1052) (0.0662) (0.1344) (0.1758)
In es men a io 0.0005 0.0001 0.0011** 0.0003 0.0002 −0.0004
(0.0004) (0.0003) (0.0005) (0.0004) (0.0005) (0.0004)
Rule o Law −0.3150*** −0.3154*** −0.4549***
(0.0911) (0.1005) (0.1337)
Obse 384 384 384 384 384 384 384 384 384
Sa gen Tes 24 (0.09) 24 (0.196) 24 (0.196) 24 (0.089) 24 (0.196) 24 (0.196) 24 (0.090) 24 (0.196) 24 (0.196)
Au oc es −1.8 (0.072) −1.1 (0.253) 1.4 (0.156) −1.2 (0.212) 0.5 (0.632) −1.7 (0.083) −1.8 (0.065) −1.5 (0.132) −1.5 (0.136)
(Con inues)
340
|
AMERICAN JOURNAL OF ECONOMICS AND SOCIOLOGY
Va iables
1 yea g ow h in e al 3 yea g ow h in e al 5 yea g ow h in e al
Mod 1aMod 2bMod 3cMod 1aMod 2bMod 3cMod 1aMod 2bMod 3c
Wald es o
coe icien s
13.2 (0.004) 474.5 (0.00) 113.4 (0.000) 415.5 (0.000) 802.0 (0.000) 971.7 (0.000) 238.8 (0.000) 1546.5 (0.000) 956.1 (0.000)
No e: Es ima ion o
G
i, =𝛼i+𝛾 +𝜋Gi, −1+𝛽Ti, +𝜃Pi, +∑
m
j
=
1
𝜙jCV
j
i,
+∑
3
h
=
1
𝛾hDh+Ui,
using di e ence GMM.
aThe ins umen s consis o 2 lags o empe a u e g ow h, 1 lag o p ecipi a ion, and 1 lag o GDP g ow h.
bThe ins umen s consis o 2 lags o ou pu gap, 2 lags o in es men a io, 2 lags o empe a u e g ow h, 1 lag o In la ion, 1 lag o lagged deb , 1 lag o ade, 1 lag o p ecipi a ion, and 1 lag o
GDP g ow h.
cThe ins umen s consis o 2 lags o ou pu gap, 2 lags o in es men a io, 2 lags o empe a u e g ow h, 1 lag o In la ion, 1 lag o lagged deb , 1 lag o ade, 1 lag o p ecipi a ion, 1 lag o GDP
g ow h, and 1 lag o ule- o - law.
*S a is ical signi icance o 10%. **S a is ical signi icance o 5%. ***S a is ical signi icance o 1%.
TABLE 2 (Con inued)
|
341
CLIMATE CHANGE AND ECONOMIC GROWTH
o hose in Table3, excep o he e ec o he empe a u e change on annual g ow h ha is no
longe s a is ically signi ican . Thus, none o he en i onmen al a iables seems o exe a obus
signi ican e ec on economic g ow h and, hence, con i ms ha he es ima es do no e eal a
clea - cu e ec o he empe a u e change on economic g ow h.
POLICY IMPLICATIONS
The empi ical es ima ions did no yield a clea - cu e ec o a ising empe a u e on economic
g ow h in Eu opean economies. Only o he case o annual g ow h a es in he FWL se ing
and o he GMM es ima ions wi h he 3- yea g ow h in e al, Mod 2 and Mod 3, a s a is ically
signi ican nega i e e ec o a highe empe a u e g ow h on economic g ow h could be ound.
Bu , in mos es ima ions, he e ec o a highe empe a u e was s a is ically insigni ican o e en
signi ican ly posi i e. Hence, he e is no obus empi ical e idence ha clima e change, meas-
u ed by a highe empe a u e and by p ecipi a ion, nega i ely a ec s he economic e olu ion o
he Eu opean economies in he sample. Consequen ly, om his pe spec i e, i is ha d o jus i y
cos ly policy measu es aiming o educe g eenhouse gas emissions in he EU. Tha holds because
hose policies go along wi h emendous cos s implying a loss o wel a e acco ding o he Kaldo –
Hicks c i e ion. Tha is suppo ed by Tol(2023) who demons a es ha he cos s o he Pa is
a ge s exceed he bene i s unless isk a e sion is high and he discoun a e is low. As ega ds
he EU, Tol(2021) s a es ha he o al cos s o educing GHG emissions exceed hei bene i s by
a ac o o en.
Fu he , as poin ed ou abo e he e exis s g ea model unce ain y as ega ds he e ec s o
GHGs. Bu , ne e heless, i canno be excluded ha he con inued ise o he GHG concen a ion
will go along wi h ising damages and ca as ophic e en s canno be excluded ei he , e en i he
empi ical e idence up o now is small. Hence, due o he p ecau iona y mo i i is jus i ied o
educe hose emissions. Howe e , unila e al measu es unde aken o cu GHG emissions o EU
coun ies do no a ec he clima e on Ea h since he sha e o EU emissions ela i e o wo ldwide
emissions is oo small o ha e a signi ican impac . Only i he wo ld coope a ed hese measu es
would be easonable. Bu , in pa icula , de eloping economies pu mo e emphasis on economic
g ow h han on en i onmen al conce ns. Thus, he Chinese p esiden announced ha China
alone de e mines how as i ackles he challenge o clima e change and i s decisions will no be
in luenced by o he coun ies (see Shephe d e al.,2023). The G20 coun ies announced ha hey
in end o suppo he p oduc ion o “clean” ene gies, bu , hey could no ag ee o phase ou ossil
uels (c . A asu,2023). The Indian go e nmen announced ha i plans o aise he use o coal o
ene gy p oduc ion om cu en ly 0,821 billions o ons pe yea o 1404 billions un il 2025 and o
1577 billions un il 2030 (TOI,2023). Russia decla ed ha i will oppose any plans o s op he use
o ossil uels in p inciple (c . Mooney & Williams,2023). The A ican Ene gy Chambe (AEC)
decla ed ha oil and gas play an ins umen al ole in he de elopmen o A ican economies and
A ican p oduce s o hose esou ces will no ag ee o a phase- ou and a e e en e y skep ical
owa d a phase- down o hose esou ces (AEC,2023). The e o e, i is o be expec ed ha he GHG
concen a ion will con inue o ise, independen o any measu es aken by EU coun ies.
Gi en ha , i is e en mo e doub ul ha he cos s o educing GHG emissions amoun ing o
illions o eu os in Eu ope yield wel a e gains. This holds because he esou ces spen , al hough
o mal in es men s, do no necessa ily aise he p oduc i e capi al s ock no p oduc i i y and,
consequen ly, no p oduc ion possibili ies in he u u e. Hence, no only he cu en gene a ion
loses bu u u e gene a ions, oo, since hey canno p o i om highe p oduc ion possibili ies in
342
|
AMERICAN JOURNAL OF ECONOMICS AND SOCIOLOGY
he u u e. A pa adoxical si ua ion a ises: policy measu es o he EU aiming o p ese e he well-
being o u u e gene a ions make hem wo se o because, on he one hand, hey do no a ec he
clima e on Ea h since EU GHG emissions a e only abou 8% o wo ldwide emissions (see P i zl
& Söllne ,2021) and, on he o he hand, hey do no lead o highe p oduc i e capi al s ock and
o an ex ension o p oduc ion possibili ies. Fu u e gene a ions in Eu ope will be con on ed wi h
g ea challenges since hey will ha e o cope wi h qui e a many p oblems such as an inc ease in
he pe cen age o elde ly people, he lack o a quali ied wo k o ce, high go e nmen deb , and
possibly necessa y measu es o adap o he clima e change, jus o men ion a ew. Only i hey
dispose o su icien economic and echnical means hey can mee hose challenges.
These conside a ions demons a e ha i is di icul o jus i y he ne ze o goal o he Eu opean
G een Deal om an economic poin o iew and om a scien i ic poin o iew. The e o e, he EU
commission and all membe coun ies should econside his goal. O cou se, his con ibu ion
canno be used o gi e conc e e policy ecommenda ions, a he , i is o be seen as an impe us o
e hink whe he i is easonable o pu sue he ne ze o goal as an end in i sel . Mo e lexibili y is de i-
ni ely needed and ca e ul cos –bene i analyses should be conduc ed o e alua e whe he conc e e
measu es a e bene icial a all, along he lines o he s udies men ioned by Tol(2021), o example.
CONCLUSION
In his pape , mode n panel es ima ion echniques ha e been applied o empi ically analyze he
ela ionship ha exis s be ween economic pe capi a g ow h and clima ic a iables allowing o
mac oeconomic and ins i u ional a iables as con ols. Tha was done o 24 Eu opean coun ies
om 2002 o 2019. The empi ical es ima ions did no yield a obus s a is ically signi ican ela-
ionship be ween clima e change and economic g ow h, whe eas he ule o law, he ou pu gap,
and he iscal a iable a e s a is ically signi ican and he co ela ion is obus .
I is a gued ha a - eaching policy measu es ha go along wi h emendous cos s should be
based on well- ounded scien i ic esul s o a oid wel a e losses. This does no hold o he ne
ze o goal o he Eu opean Union as poin ed ou in his pape . The e o e, he ne ze o goal is o be
seen as skep ical om a scien i ic poin o iew.
This s udy has analyzed he e ec s o empe a u e g ow h and p ecipi a ion in Eu opean
economies om 2002 o 2019, con olling o he e ec s o economic and ins i u ional a i-
ables. Hence, i should be kep in mind ha he de i ed esul s hold o his pe iod and o
TABLE 3 Es ima ion—FWL app oach.
Va iable
Response a iable: GDP g ow h
1 yea in e al 3 yea in e al 5 yea in e al
Resid ( emp g ow h) −0.0135*** 0.0011 −0.0058
(0.0044) (0.0049) (0.0055)
Obse 384 384 384
Fi s s ep p ocedu e GMM GMM GMM
Second s ep p ocedu e Fixed e ec Fixed e ec s Fixed e ec s
Indi idual ixed e ec s Yes Yes Yes
Time ixed e ec s Yes Yes Yes
***S a is ical signi icance o 1%.

|
343
CLIMATE CHANGE AND ECONOMIC GROWTH
he economies unde conside a ion, bu , no necessa ily in gene al. Fu he , in he analysis
he e ogenei y in he da a was no allowed o , meaning ha he e ec s o clima ic change may
u n ou di e en depending on which economies o egions a e conside ed. In addi ion, i
could be in e es ing o analyze whe he he e exis se e al egimes ha a e cha ac e ized by
di e en ela ions be ween empe a u e change and g ow h, as in he case o public deb pol-
icies (e.g., Owusu e al.,2023). This is le o u u e esea ch ha could explo e hese issues
u he .
ACKNOWLEDGMENTS
We hank he pa icipan s and in pa icula he discussan Bas an Aa le o aluable commen s
and sugges ions. Commen s and sugges ions by wo e e ees o he jou nal a e g a e ully
acknowledged. Open Access unding enabled and o ganized by P ojek DEAL.
CONFLICT OF INTEREST STATEMENT
The au ho s decla e ha hey ha e no compe ing in e es s ha could ha e in luenced he
ou come o his esea ch.
DATA AVAILABILITY STATEMENT
The da ase used o his s udy is a ailable upon eques .
ORCID
Al ed G eine  h ps://o cid.o g/0000-0003-1685-2593
ENDNOTES
1 Fo de ails as o ha analysis, see Le ine and Renel (1992, p. 944).
2 E minan e al.(2016) show ha o e y high alues o GHGs, he ela ion changes. Bu , he basic o m emains he
same, ha is o CO2 i is gi en by he ln and o N2O and CH4 by he squa e oo .
3 Fo de ails see he pape by I ing e al.(2021).
4 See h ps:// commi ssion. eu opa. eu/ s a egy- and- policy/ p io i ies - 2019- 2024/ eu op ean- g een - deal_ en (accessed
20.07.2024).
5 Ini ially, 26 economies we e included, howe e , due o da a a ailabili y he sample had o be educed o 24, as he e
we e limi ed ins i u ional da a o he Czech Republic and o Slo akia. Fu he , he ime ho izon had o be sho ened
due o missing obse a ions om he 1990s o he s a ing poin in 2002.
6 All alues in he ables and in Figu eA1 e e o annual pe capi a GDP g ow h a es unless s a ed o he wise.
7 In he case o he one ( h ee, i e) yea s g ow h a e model he i s da a poin o GDP was in 2001 (1999,
1997).
REFERENCES
AEC. (2023, Decembe 12). We will no sell- ou by phasing ou : A ican nego ia ions u ged o igh o A ica. A ican
Ene gy Chambe . Re ie ed July 20, 2024, om h ps:// ene g ycham be . o g/ we- will- no - sell- ou - by- phasi ng-
ou - a ic an- nego ia io ns- u ged - o- igh - o - a ica/
Alimon i, G., & Ma iani, L. (2023). Is he numbe o global na u al disas e s inc easing? En i onmen al Haza ds,
23(2), 186–202. h ps:// doi. o g/ 10. 1080/ 17477 891. 2023. 2239807
AMECO. (2021). Eu opean Commission's Di ec o a e Gene al o Economic and Financial A ai s mac o- economic
da abase. Re ie ed Ma ch 8, 2021, om h ps:// ec. eu opa. eu/ in o/ busin ess- econo my- eu o/ indic a o s - s a i
s ics/ econo mic- da ab ases/ mac o - econo mic- da ab ase- ameco/ ameco - da ab ase_ en
344
|
AMERICAN JOURNAL OF ECONOMICS AND SOCIOLOGY
A asu, S. (2023, Sep embe 9). G oup o 20 coun ies ag ee o inc ease clean ene gy bu each no deal on phasing ou
ossil uels. Associa ed P ess. Re ie ed July 20, 2024, om h ps:// apnews. com/ a ic le/ india - clima e- chang
e- g20- cop28 - c25dd 753a2 8 52 0261e c4858 b921a1a
A ellano, M., & Bond, S. (1991). Some es s o speci ica ion o panel da a: Mon e Ca lo e idence and an applica-
ion o employmen equa ions. The Re iew o Economic S udies, 58(2), 277–297.
A ias, P. A., Bellouin, N., Coppola, E., Jones, R. G., K inne , G., Ma o zke, J., Naik, V., Palme , M. D., Pla ne ,
G.- K., Rogelj, J., Rojas, M., Sillmann, J., S o el mo, T., Tho ne, P. W., T ewin, B., Achu a Rao, K., Adhika y,
B., Allan, R. P., A mou , K., … Zick eld, K. (2021). Technical summa y. In V. Masson- Delmo e, P. Zhai, A.
Pi ani, S. L. Conno s, C. Péan, S. Be ge , N. Caud, Y. Chen, L. Gold a b, M. I. Gomis, M. Huang, K. Lei zell,
E. Lonnoy, J. B. R. Ma hews, T. K. Maycock, T. Wa e ield, O. Yelekçi, R. Yu, & B. Zhou (Eds.), Clima e
change 2021: The physical science basis. Con ibu ion o Wo king G oup I o The Six h Assessmen Repo o he
In e go e nmen al Panel on Clima e Change (pp. 33–144). Camb idge Uni e si y P ess. h ps:// doi. o g/ 10.
1017/ 97810 09157 896. 002
Bal agi, B. H. (2021). Dynamic panel da a models. In Econome ic analysis o panel da a. Sp inge Tex s in Business
and Economics.
Ba ke , D. (2022). Tempe a u e and U.S. economic g ow h: Commen on Colaci o, Ho mannn, and Phan. Econ
Jou nal Wa ch, 19(2), 176–189.
Ba ke , D. (2023). Tempe a u e shocks and economic g ow h: Commen on Dell, Jones, and Olken. Econ Jou nal
Wa ch, 20(2), 234–253.
Ba ke , D. (2024). Global non- linea e ec o empe a u e on economic p oduc ion: Commen on Bu ke, Hsiang,
and Miguel. Econ Jou nal Wa ch, 21(1), 35–68.
Ba ancea, L. M., Ra hnaswamy, M. M., Rus, M.- I., & Tulai, H. (2023). De e minan s o economic g ow h o he
las hal o cen u y: A panel da a analysis on 50 coun ies. Jou nal o he Knowledge Economy, 14, 2578–2602.
Baum, A., Cheche i a- Wes phal, C., & Ro he , P. (2013). Deb and g ow h: New e idence o he eu o a ea. Jou nal
o In e na ional Money and Finance, 32, 809–821.
Be na d, J.- T., & Kichian, M. (2021). The impac o a e enue- neu al ca bon ax on GDP dynamics: The case o
B i ish Columbia. The Ene gy Jou nal, 42(3), 205–224.
Boekemeie , B., & G eine , A. (2015). On he ela ion be ween public deb and economic g ow h: An empi ical
in es iga ion. Economics and Business Le e s, 4(4), 137–150.
Bo zen, W. J. W., Oli ie Deschenes, O., & Sande s, M. (2019). The economic impac s o na u al disas e s: A e iew
o models and empi ical s udies. Re iew o En i onmen al Economics and Policy, 13, 167–188.
B uns, S. B., & Ioannidis, J. P. A. (2020). De e minan s o economic g ow h: Di e en ime di e en answe ?
Jou nal o Mac oeconomics, 63, 103185. h ps:// doi. o g/ 10. 1016/j. jmac o. 2019. 103185
Bu ke, M., Hsiang, S. M., & Miguel, E. (2015). Global non- linea e ec o empe a u e on economic p oduc ion.
Na u e Le e , 527, 235–250. h ps:// doi. o g/ 10. 1038/ na u e15725
Chim, M. M., Aub y, T. J., Ab aham, N. L., Ma shall, L., Mulcahy, J., Wal on, J., & Schmid , A. (2023). Clima e
p ojec ions e y likely unde es ima e u u e olcanic o cing and i s clima ic e ec s. Geophysical Resea ch
Le e s, 50, e2023GL103743. h ps:// doi. o g/ 10. 1029/ 2023G L103743
Colaci o, R., Ho mann, B., & Phan, T. (2019). Tempe a u e and g ow h: A panel analysis o he Uni ed S a es.
Jou nal o Money, C edi and Banking, 51(2–3), 313–368.
Dell, M., Jones, B. F., & Olken, B. A. (2012). Tempe a u e shocks and economic g ow h: E idence om he las hal
cen u y. Ame ican Economic Jou nal: Mac oeconomics, 4(3), 66–95.
E minan, M., Myh e, G., Highwood, E. J., & Shine, K. P. (2016). Radia i e o cing o ca bon dioxide, me hane,
and ni ous oxide: A signi ican e ision o he me hane adia i e o cing. Geophysical Resea ch Le e s, 43,
12614–12623. h ps:// doi. o g/ 10. 1002/ 2016G L071930
F isch, R., & Waugh, F. V. (1933). Pa ial ime eg ession as compa ed wi h indi idual ends. Econome ica, 1(4), 387–401.
Fu ado, K., Tsushima, Y., Field, P. R., Ros on, J., & Sex on, D. (2023). The ela ionship be ween he p esen - day
seasonal cycles o clouds in he mid- la i udes and cloud adia i e eedback. Geophysical Resea ch Le e s, 50,
e2023GL103902. h ps:// doi. o g/ 10. 1029/ 2023G L103902
G eine , A., & Semmle , W. (2005). Economic g ow h and global wa ming: A model o mul iple equilib ia and
h esholds. Jou nal o Economic Beha io and O ganiza ion, 57, 430–447.
G eine , A., & Semmle , W. (2008). The global en i onmen , na u al esou ces, and economic g ow h. Ox o d
Uni e si y P ess.
|
345
CLIMATE CHANGE AND ECONOMIC GROWTH
Hausman, J. A. (1978). Speci ica ion es s in econome ics. Econome ica, 46(6), 1251–1271.
Hill, P. G., Holloway, C. E., By ne, M. P., Lambe , F. H., & Webb, M. J. (2023). Clima e models unde es ima e
dynamic cloud eedbacks in he opics. Geophysical Resea ch Le e s, 50, e2023GL104573. h ps:// doi. o g/
10. 1029/ 2023G L104573
I ing, D., Hobbs, W., Ch uch, J., & Zika, J. (2021). A mass and ene gy conse a ion analysis o d i in he CMIP6
ensemble. Jou nal o Clima e, 34, 3157–3170.
Känzig, D. R. (2023). The unequal consequences o ca bon p icing. Na ional Bu eau o Economic Resea ch. Wo king
Pape 31221. h p:// www. nbe . o g/ pape s/ w31221
Kap hamme , F. (2023). The economic consequences o e ec i e ca bon axes. CAMP Wo king Pape Se ies, No
1/2023.
Kelle , K., & Nicholas, R. (2015). Imp o ing clima e p ojec ions o be e in o m clima e isk managemen . In W.
Semmle & L. Be na d (Eds.), The Ox o d handbook o he mac oeconomics o global wa ming (pp. 9–18).
Ox o d Uni e si y P ess.
Knelle , R., Bleaney, M. F., & Gemmell, N. (1999). Fiscal policy and g ow h: E idence om OECD coun ies.
Jou nal o Public Economics, 74, 171–190.
Kols ad, C. D., & Moo e, F. C. (2020). Es ima ing he economic impac s o clima e change using wea he obse a-
ions. Re iew o En i onmen al Economics and Policy, 14(1), 1–24.
Leame , E. E. (1983). Le 's ake he con ou o econome ics. Ame ican Economic Re iew, 73(1), 31–43.
Leame , E. E. (1985). Sensi i i y analyses would help. Ame ican Economic Re iew, 75(3), 308–313.
Le ine, R., & Renel , D. (1992). A sensi i i y analysis o c oss- coun y g ow h eg essions. Ame ican Economic
Re iew, 82(4), 942–963.
Lombo g, B. (2020). Wel a e in he 21s cen u y: Inc easing de elopmen , educing inequali y, he impac
o clima e change, and he cos o clima e policies. Technological Fo ecas ing and Social Change, 156,
119981.
Lo ell, M. C. (1963). Seasonal adjus men o economic ime se ies and mul iple eg ession analysis. Jou nal o he
Ame ican S a is ical Associa ion, 58(304), 993–1010.
Meinshausen, M., Meinshausen, N., Ha e, W., Rape , S. C. B., F iele , K., Knu i, R., F ame, D. J., & Allen,
M. R. (2009). G eenhouse- gas emission a ge s o limi ing global wa ming o 2°C. Na u e Le e s, 458,
1158–1163.
Meinshausen, M., Rape , S. C. B., & Wigley, T. M. L. (2011). Emula ing coupled a mosphe e- ocean and ca bon
cycle models wi h a simple model, MAGICC6- pa 1: Model desc ip ion and calib a ion. A mosphe ic
Chemis y and Pyhsics, 11, 1417–1456.
Me cal , G. E., & S ock, J. H. (2020). The mac oeconomic impac o Eu ope's ca bon axes. Na ional Bu eau o
Economic Resea ch. Wo king Pape 27488. h p:// www. nbe . o g/ pape s/ w27488
Mooney, A., & Williams, A. (2023, Oc obe 4). Russia says i will oppose plan o phase ou ossil uels. Financial
Times. Re ie ed July 20, 2024, om h ps:// www. . com/ con e n / 299c3 ec6- cbbe- 4970- a874- a 539 16e769d
Mülmens äd , J., Salzmann, M., Kay, J. E., Zelinka, M. D., Ma, P.- L., Nam, C., K e zschma , J., Hö nig, S., & Quaas,
J. (2021). An unde es ima ed nega i e cloud eedback om cloud li e ime changes. Na u e Clima e Change,
11, 508–513. h ps:// doi. o g/ 10. 1038/ s4155 8- 021- 01038 - 1
Mu phy, K. M., Shlei e , A., & Vishny, R. W. (1991). The alloca ion o alen : Implica ions o g ow h. The Qua e ly
Jou nal o Economics, 106(2), 503–530. h ps:// doi. o g/ 10. 2307/ 2937945
Neumann, J. E., Willwe h, J., Ma inich, J., McFa land, J., Sa o im, M. C., & Yohe, G. (2020). Clima e damage unc-
ions o es ima ing he economic impac s o clima e change in he Uni ed S a es. Re iew o En i onmen al
Economics and Policy, 14, 25–43.
Newell, R. G., P es , B. C., & Sex on, S. E. (2021). The GDP- empe a u e ela ionship: Implica ions o clima e
change damages. Jou nal o En i onmen al Economics and Managemen , 108, 102445.
Newey, W. K., & Wes , K. D. (1987). A simple, posi i e semi- de ini e, he e oskedas ici y and au oco ela ion con-
sis en co a iance ma ix. Econome ica, 55(3), 703–708.
Noce a, S., Tonin, S., & Ca alle o, F. (2015). The economic impac o g eenhouse gas aba emen h ough a
me a- analysis: Valua ion, consequences and implica ions in e ms o anspo policy. T anspo Policy,
37, 31–43.
No dhaus, W. D., & Mo a , A. (2017). A su ey o global impac s o clima e change: Replica ion, su ey me hods, and
a s a is ical analysis. Cowles Founda ion Discussion Pape No. 2096. Yale Uni e si y.
346
|
AMERICAN JOURNAL OF ECONOMICS AND SOCIOLOGY
Owusu, B., Bökemeie , B., & G eine , A. (2023). Regime- based deb sus ainabili y analysis: E idence om eu o
a ea economies. Eu opean Jou nal o Poli ical Economy, 2023, 102458. h ps:// doi. o g/ 10. 1016/j. ejpol eco. 2023.
102458
Pesa an, M. H. (2004). Gene al diagnos ic es s o c oss sec ion dependence in panels. CESi o Wo king Pape Se ies
1229. CESi o.
Pesa an, M. H., & Xie, Y. (2021). A bias- co ec ed CD es o e o c oss- sec ional dependence in panel da a mod-
els wi h la en ac o s. a Xi p ep in a Xi : 2109.00408.
P i zl, R., & Söllne , F. (2021). Ra ionale Klimapoli ik—ökonomische An o de ungen und poli ische Hinde nisse.
Lis Fo um, 46, 423–449. h ps:// doi. o g/ 10. 1007/ s4102 5- 021- 00224 - 5
Ranasinghe, R., Ruane, A. C., Vau a d, R., A nell, N., Coppola, E., C uz, F. A., Dessai, S., Islam, A. S., Rahimi,
M., Ruiz Ca ascal, D., Sillmann, J., Sylla, M. B., Tebaldi, C., Wang, W., & Zaaboul, R. (2021). Clima e change
in o ma ion o egional impac and o isk assessmen . In V. Masson- Delmo e, P. Zhai, A. Pi ani, S. L.
Conno s, C. Pean, S. Be ge , N. Caud, Y. Chen, L. Gold a b, M. I. Gomis, M. Huang, K. Lei zell, E. Lonnoy, J.
B. R. Ma hews, T. K. Maycock, T. Wa e ield, O. Yelekci, R. Yu, & B. Zhou (Eds.), Clima e change 2021: The
physical science basis. Con ibu ion o Wo king G oup I o he Six h Assessmen Repo o he In e go e nmen al
Panel on Clima e Change (pp. 1767–1926). Camb idge Uni e si y P ess. h ps:// doi. o g/ 10. 1017/ 97810 09157
896. 014
Rosen, R. R. (2019). Tempe a u e impac on GDP g ow h is o e es ima ed. P oceedings o he Na ional Academy o
Sciences o he Uni ed S a es o Ame ica, 116(33), 16170.
Sala- i- Ma in, X. S. (1997). I jus an wo million eg essions. Ame ican Economic Re iew, Pape s and P oceedings,
87(2), 178–183.
Shephe d, C., Rauhala, E., & Mooney, C. (2023, July 19). As he wo ld sizzles, China says i will deal wi h clima e
i s own way. The Washing on Pos . Re ie ed July 20, 2024, om h ps:// www. washi ng on pos . com/ clima e-
en i onmen / 2023/ 07/ 19/ clima e- chang e- hea - wa e- china/
She wood, S. C., Webb, M. J., Annan, J. D., A mou , K. C., Fo s e , P. M., Ha g ea es, J. C., Hege l, G., Klein, S.
A., Ma el, K. D., Rohling, E. J., Wa anabe, M., And ews, T., B aconno , P., B e he on, C. S., Fos e , G. L.,
Haus a he , Z., on de Heyd , A. S., Knu i, R., Mau i sen, T., … Zelink, M. D. (2020). An assessmen o
Ea h's clima e sensi i i y using mul iple lines o e idence. Re iews o Geophysics, 58, 1–92. h ps:// doi. o g/
10. 1029/ 2019R G000678
Solow, R. M. (1957). Technical change and he agg ega e p oduc ion unc ion. The Re iew o Economics and
S a is ics, 39(3), 312–320.
SRU (Sach e s ändigen a ü Umwel agen). (2019). Demok a isch egie en in ökologischen G enzen. Zu
Legi ima ion on Umwel poli ik. Sonde gu ach en Juni 2019.
Tinbe gen, J. (1942). Zu Theo ie de lang is igen Wi scha sen wicklung. Wel wi scha liches A chi , 55,
511–549.
TOI. (2023, No embe 14). Coal minis y plans 1,404 million onne p oduc ion by 2027. The Times o India.
Re ie ed om h ps:// imes o ind ia. india imes. com/ busin ess/ coal- minis y- plans - 1404- milli on- onne -
p odu c ion - by- 2027/ a ic leshow/ 10520 1841. cms
Tol, R. (2023). Cos s and bene i s o he Pa is clima e a ge s. Clima e Change Economics, 14(4), 2340003. h ps://
doi. o g/ 10. 1142/ S2010 00782 3400031
Tol, R. S. J. (2021). Eu ope's clima e a ge o 2050: An assessmen . In e economics, Re iew o Eu opean Economic
Policy, 56(6), 330–335. h ps:// doi. o g/ 10. 1007/ s1027 2- 021- 1012- 7
Uni ed Na ions. (2015). Pa is ag eemen . Re ie ed July 20, 2024, om h ps:// un ccc. in / si es/ de au l / iles/ engli
sh_ pa is_ ag ee men . pd
Voosen, P. (2022). ‘Ho ’ clima e models exagge a e ea h impac s. Science, 376(6594), 685.
Woo, J., & Kuma , M. S. (2015). Public deb and g ow h. Economica, 82(328), 705–739.
Wo ld Bank. (2023a). The wo ldwide go e nance indica o s (WGI). Re ie ed Ap il, 20, 2023, om h ps:// in o.
wo ld bank. o g/ go e nance/ wgi/
Wo ld Bank. (2023b). Clima e change knowledge po al (CCKP). Re ie ed July, 7, 2023, om h ps:// clima ekno
wledg epo al. wo ld bank. o g/
Zanche in, D. (2023). Volcanic e up ions: A sou ce o i educible unce ain y o u u e clima es. Geophysical
Resea ch Le e s, 50, e2023GL105482. h ps:// doi. o g/ 10. 1029/ 2023G L105482
|
353
CLIMATE CHANGE AND ECONOMIC GROWTH
TABLE A3 Panel uni oo es .
Va iables
Im Pesa an and Shin es Le in Lin and Chu es CIPS
Tes s a p- alue Tes s a p- alue Tes s a p- alue
P ecipi a ion −18.083*** 0.000 −18.665*** 0.000 −3.3533** 0.01
Temp g ow h −24.861*** 0.000 −21.127*** 0.000 −3.5097** 0.01
Deb o GDP −1.414*0.079 −3.26*** 0.001 −2.4636 0.1
Ou pu gap −6.01*** 0.000 −5.44*** 0.000 −2.3989 0.1
In es men a io −0.62 0.266 −2.024** 0.022 −2.257 0.1
In la ion −7.12*** 0.000 −7.18*** 0.000 −2.3524 0.1
T ade −2.584*** 0.005 −4.232*** 0.000 −3.5097** 0.01
GDP g ow h −8.86*** 0.000 −9.17*** 0.000 −3.2264** 0.01
Rule o law −3.97*** 0.000 −3.17*** 0.001 −1.6424 0.1
*S a is ical signi icance o 10%. **S a is ical signi icance o 5%. ***S a is ical signi icance o 1%.

354
|
AMERICAN JOURNAL OF ECONOMICS AND SOCIOLOGY
TABLE A4 Tes ing o indi idual and ime e ec s— ull sample.
Va iables
Time e ec s Indi idual e ec s Indi idual and ime e ec s
Tes - s a s p- alue D 1 D 2 Tes - s a s p- alue D 1 D 2 Tes - s a s p- alue D 1 D 2
Values 9.683 0.000 16 406 6.141 0.000 23 399 9.353 0.000 39 383
Num obs 432 432 432
No e: F- es o indi idual and/o ime e ec s. The null hypo hesis indica es he absence o a signi ican e ec (indi idual, ime, o bo h e ec s).
|
355
CLIMATE CHANGE AND ECONOMIC GROWTH
TABLE A5 Panel poolabili y es — ull sample.
Va iables
Fixed e ec s (a) and P cm Fixed e ec s (b) and P cm
F- s a s. p- alue D 1 D 2 F- s a s p- alue D 1 D 2
Values 2.453 0.000 185 216 1.122 0.223 253 144
Num obs 432 432
No e: Chow es o poolabili y o panel da a. Fixed e ec s wi hin model and pooled panel model a e compa ed o Panel
Va iable Coe icien Model (p cm). Null hypo hesis s a es model s abili y and hence compa abili y o models. Al e na i e
hypo hesis implies model ins abili y. The es ima ed model is as ollows
G
i, =𝛼i+𝛾 +𝛽Ti, +𝜃Pi, +∑
m
j
=1𝜙CV
j
i
,
+Ui,
, whe e
he dependen a iable ep esen s economic g ow h, he igh - hand side a iables include he lagged deb empe a u e g ow h,
he log o p ecipi a ion, and a se o con ol a iables ep esen ed by he ec o no a ion
CVj
i
. To aid poolabili y he model is
augmen ed wi h a se o coun y dummies (acco ding o clima e a iables) namely: Finland, Sweden, and Es onia.
356
|
AMERICAN JOURNAL OF ECONOMICS AND SOCIOLOGY
TABLE A6 Panel linea ixed e ec s model (wi h lagged empe a u e g ow h).
Va iables
1 yea g ow h in e al 3 yea g ow h in e al 5 yea g ow h in e al
Mod 1 Mod 2 Mod 3 Mod 1 Mod 2 Mod 3 Mod 1 Mod 2 Mod 3
Lagged emp g ow h −0.0006 −0.0157 −0.0111 0.0869*0.0267 0.0430 0.1001*0.0016 0.0245
(0.0219) (0.0197) (0.0196) (0.0482) (0.0303) (0.0273) (0.0570) (0.0451) (0.0429)
P ecipi a ion 0.0014 −0.0029 −0.0039 0.0018 −0.0063 −0.0095 0.0102 0.0058 0.0013
(0.0090) (0.0067) (0.0075) (0.0171) (0.0114) (0.0099) (0.0247) (0.0188) (0.0165)
Lagged deb a io 0.0538*** 0.0577*** 0.1078*** 0.1218*** 0.0783 0.0980*
(0.0160) (0.0106) (0.0407) (0.0345) (0.0627) (0.0534)
T ade −0.0005 −0.0002 −0.0022** −0.0012 −0.0021*−0.0008
(0.0003) (0.0003) (0.0010) (0.0008) (0.0019) (0.0016)
Ou pu gap 0.0055*** 0.0057*** 0.0141*** 0.0147*** 0.0140*** 0.0148***
(0.0008) (0.0004) (0.0018) (0.0014) (0.0033) (0.0025)
In la ion 0.0859*0.0621*0.2221** 0.1375*0.4003*** 0.28128**
(0.0482) (0.0372) (0.0856) (0.0811) (0.1353) (0.1210)
In es men a io −0.0043 0.0043 0.0340 0.0646** 0.1085 0.1517***
(0.0119) (0.0076) (0.0384) (0.0296) (0.0671) (0.0544)
Rule o law −0.0414*** −0.1473*** −0.2074***
(0.0081) (0.0230) (0.0342)
R20.004 0.340 0.379 0.011 0.508 0.612 0.005 0.399 0.497
Obse 432 432 432 432 432 432 432 432 432
CSD es 0.65
(0.517)
−0.84 (0.413) −1.22 (0.224) 0.25
(0.802)
−0.76 (0.446) −2.08 (0.037) 0.11
(0.909)
0.50 (0.615) −0.59 (0.553)
No e: Es ima ion o
Gi
,
=𝛼
i
+𝛾
+𝛽T
i
,
+𝜃P
i
,
+∑
m
j
=
1
𝜙CV
j
i,
+∑
3
h
=
1
𝛾
h
D
h
+U
i
,
using panel ixed e ec s. S anda d e o s a e based on he HAC es ima o , hence hey a e obus agains se ial
co ela ion and he e oskedas ici y.
*S a is ical signi icance o 10%. **S a is ical signi icance o 5%. ***S a is ical signi icance o 1%.
|
357
CLIMATE CHANGE AND ECONOMIC GROWTH
TABLE A7 Dynamic panel model (wi h lagged empe a u e g ow h).
Va iables
1 yea g ow h in e al 3 yea g ow h in e al 5 yea g ow h in e al
Mod 1aMod 2bMod 3cMod 1aMod 2bMod 3cMod 1aMod 2bMod 3c
Lagged GDP
g ow h
0.4672*** −0.4253*** −0.4673*** 1.4528*** 0.2228*** 0.2119*** 1.1169*** 0.4259*** 0.4865***
(0.1804) (0.0455) (0.0810) (0.0703) (0.0484) (0.0382) (0.0706) (0.0623) (0.0744)
Lagged emp
g ow h
−0.0173** −0.0102*−0.0040 0.0127 0.0236** 0.0252** −0.0086 0.0023 0.0031
(0.0073) (0.0060) (0.0069) (0.0316) (0.0091) (0.0098) (0.0122) (0.0065) (0.0083)
P ecipi a ion 0.0199 0.0027 −0.0048 0.0346 0.0405*** 0.0330*0.0598** 0.0284** 0.0045
(0.0154) (0.0081) (0.0115) (0.0337) (0.0162) (0.0196) (0.0230) (0.0141) (0.0208)
Lagged deb
a io
0.0016*** 0.0010** 0.0017** 0.0008** 0.0010 −0.0003
(0.0006) (0.0004) (0.0007) (0.0004) (0.0266) (0.0005)
T ade 0.1108 0.3783** −0.3067 −0.2199 −0.6959*−0.0414
(0.1913) (0.1877) (0.2731) (0.1677) (0.3751) (0.2824)
Ou pu gap 0.0136*** 0.0138*** 0.0230*** 0.0196*** 0.0188*** 0.0171***
(0.0016) (0.0020) (0.0023) (0.0022) (0.0022) (0.0030)
In la ion 0.0481 0.0988 −0.0711 0.01162 −0.0471 0.1424
(0.0961) (0.0975) (0.0866) (0.0641) (0.1368) (0.1751)
In es men
a io
0.0005 0.0001 0.0011** 0.0003 0.0003 −0.0005
(0.0004) (0.0003) (0.0005) (0.0004) (0.0005) (0.0004)
Rule o law −0.3054*** −0.3327*** −0.4604***
(0.0927) (0.1063) (0.1371)
Obse 384 384 384 384 384 384 384 384 384
Sa gen es 24 (0.065) 24 (0.196) 24 (0.196) 24 (0.065) 24 (0.196) 24 (0.196) 24 (0.065) 24 (0.196) 24 (0.196)
Au oc es −1.6 (0.116) −1.0 (0.297) −1.5 (0.140) −1.2 (0.228) 0.1 (0.910) −1.9 (0.063) −2.3 (0.018) −1.5 (0.121) −1.5 (0.125)
(Con inues)
358
|
AMERICAN JOURNAL OF ECONOMICS AND SOCIOLOGY
Va iables
1 yea g ow h in e al 3 yea g ow h in e al 5 yea g ow h in e al
Mod 1aMod 2bMod 3cMod 1aMod 2bMod 3cMod 1aMod 2bMod 3c
Wald es o
coe icien s
16.4 (0.001) 422.05 138.8 (0.000) 436.6 (0.000) 785.9 (0.000) 4199.4 (0.000) 276.6 (0.000) 2394.9 (0.000) 934.0 (0.000)
No e: Es ima ion o
Gi
,
=𝛼
i
+𝛾
+𝜋G
i
,
−1+𝛽T
i
,
+𝜃P
i
,
+∑
m
j=1
𝜙
j
CV
j
i,
+∑
3
h=1
𝛾
h
D
h
+U
i
,
using di e ence GMM.
aThe ins umen s consis o 2 lags o empe a u e g ow h, 1 lag o p ecipi a ion, and 1 lag o GDP g ow h.
bThe ins umen s consis o 2 lags o ou pu gap, 2 lags o in es men a io, 2 lags o empe a u e g ow h, 1 lag o In la ion, 1 lag o lagged deb , 1 lag o ade, 1 lag o p ecipi a ion, and 1 lag o
GDP g ow h.
cThe ins umen s consis s o 2 lags o ou pu gap, 2 lags o in es men a io, 2 lags o empe a u e g ow h, 1 lag o In la ion, 1 lag o lagged deb , 1 lag o ade, 1 lag o p ecipi a ion, 1 lag o GDP
g ow h, and 1 lag o ule- o - law.
*S a is ical signi icance o 10%. **S a is ical signi icance o 5%. ***S a is ical signi icance o 1%.
TABLE A7 (Con inued)

|
359
CLIMATE CHANGE AND ECONOMIC GROWTH
TABLE A9 Mul icollinea i y es ( a iance in la ion ac o ).
Va iable
Mod 1 Mod 2 Mod 3
VIF VIF VIF
Temp g ow h 1.17 1.19 1.20
log (P ecipi a ion) 1.002 1.23 1.24
Ou pu gap 1.42 1.43
In la ion 1.31 1.36
In es men a io 1.49 1.58
Deb o GDP 1.42 1.48
Te ms o ade 1.05 1.14
Rule o law 1.28
TABLE A10 Hausman es .
Model Tes s a is ic p- alue
Model wi h 1- yea g ow h a e 41.61 0.000
Model wi h 3- yea g ow h a e 78.99 0.000
Model wi h 5- yea g ow h a e 98.27 0.000
TABLE A8 Es ima ion—FWL app oach (wi h lagged empe a u e g ow h).
Va iable
Response a iable: GDP g ow h
1 yea in e al 3 yea in e al 5 yea in e al
Resid (lagged emp
g ow h)
0.0006 0.0301 0.0038
(0.0178) (0.0211) (0.0294)
Obse 384 384 384
Fi s s ep p ocedu e GMM GMM GMM
Second s ep p ocedu e Fixed e ec Fixed e ec s Fixed e ec s
Indi idual ixed e ec s Yes Yes Yes
Time ixed e ec s Yes Yes Yes