People are not so different from crops, turns out

A decade of strong work by my senior colleagues here at G-FEED have taught us that crops don’t like it hot: 

• Wolfram and Mike have the original go-to paper on US ag [ungated copy here], showing that yields for the main US field crops respond very negatively to extreme heat exposure
• David, Wolfram, Mike + coauthors have a nice update in Science using even fancier data for the US, showing that while average corn yields have continued to increase in the US, the sensitivity of corn to high temperatures and moisture deficits has not diminished. 
• And Max et al have a series of nice papers looking at rice in Asia, showing that hot nighttime temperatures are particularly bad for yields.

The results matter a lot for our understanding of the potential impacts of climate change, suggesting that in the absence of substantial adaptation we should expect climate change to exert significant downward pressure on future growth in agricultural productivity.

But we also know that for many countries of the world, agriculture makes up a small share of the economy.  So if we want to say something meaningful about overall effects of climate change on the economies of these countries (and of the world as a whole), we're also going to need to know something about how non-agricultural sectors of the economy might respond to a warmer climate. 

Thankfully there is a growing body of research on non-agricultural effects of climate -- and there is a very nice summary of some of this research (as well as the ag research) just out in this month's Journal of Economic Literature, by heavyweights Dell, Jones, and Olken. [earlier ungated version here].

I thought it would be useful to highlight some of this research here -- some of it already published (and mentioned elsewhere on this blog), but some of it quite new.  The overall take-home from these papers is that non-agricultural sectors are often also surprisingly sensitive to hot temperatures

First here are three papers that are already published:

1. Sol's 2010 PNAS paper was one of the first to look carefully at an array of non-agricultural outcomes (always ahead of the game, Sol...), using a panel of Caribbean countries from 1970-2006. Below is the money plot, showing strong negative responses of a range of non-ag sectors to temperature.  Point estimate for non-ag sectors as a whole was -2.4% per +1C, which was higher than the comparable estimate for the ag sector (-0.1% per 1C).

From Hsiang (2010)

2. Using a country-level panel, Dell Jones and Olken's instaclassic 2012 paper [ungated here] shows that both ag and non-ag output responds negatively to warmer average temperatures -- but only in poor countries. They find, for instance, that growth in industrial output in poor countries falls 2% for every 1C increase in temperature, which is only slightly lower than the -2.7% per 1C decline they find for ag. They find no effects in rich countries. 

3. Graff Zivin and Neidell (2014) use national time use surveys in the US to show that people work a lot less on hot days.  Below is their money fig:  on really hot days (>90F), people in "exposed" industries (which as they define it includes everything from ag to construction to manufacturing) work almost an hour less (left panel).  The right panels show leisure time.  So instead of working, people sit in their air conditioning and watch TV. 

from Graff Zivin and Neidell 2014.  Left panel is labor supply, right two panels are outdoor and indoor leisure time. 

And here are three papers on the topic you might not have seen, all of which are current working papers:

4.  Cachon, Gallino, and Olivares (2012 working paper) show, somewhat surprisingly, that US car manufacturing is substantially affected by the weather.  Using plant-level data from 64 plants, They show that days above 90F reduce output on that day by about 1%, and that production does not catch up in the week following a hot spell (i.e. hot days did not simply displace production).

5. Adhvaryu, Kala, and Nyshadham (2014 working paper)  use very detailed production data from garment manufacturing plants to show that hotter temperatures reduce production efficiency (defined as how much a particular production line produces on a given day, relative to how much engineering estimates say they should have produced given the complexity of the garment they were producing that day).  Not sure if I have the units right, but I think they find about a 0.5% decrease in production efficiency on a day that's +1C hotter.

6. Finally, in a related study, Somanathan et al (2014 working paper) use a nation-wide panel of Indian manufacturing firms and show that output decreases by 2.8% per +1C increase in annual average temperature.  They show that this is almost all coming from increased exposure above 25C, again pointing to a non-linear response of output to temperature.  For a subset of firms, they also collect detailed worker-level daily output data, and show that individual-level productivity suffers when temperatures are high -- but that this link is broken when plants are air conditioned.

So apparently it's not just crops that do badly when it's hot.  Most of the studies just mentioned cite the human physiological effects of heat stress as the likely explanation for why non-agricultural output also falls with increased heat exposure, and this seems both intuitive and plausible -- particularly given how similar the effect sizes are across these different settings.  But what we don't yet know is how these mostly micro-level results might aggregate up to the macro level. Do they matter for the projected overall effect of climate change on economies?  This is something Sol and I have been working on and hope to be able to share results on soon.  In the meantime, I will be setting my thermostat to 68F.