Description

This paper studies the impact that climate change has had on Chilean economic activitythrough a stochastic growth model where economic activity is affected by variations in temperature and precipitation with respect to their historical norms. For this, a regional panel is used between the first quarter of 1997 and the fourth quarter of 2019 for each of the Chilean GDP industries. The results show that climate change has negative effects on GDP. Specifically, an increase in temperature has a negative and significant impact on economic activity for the vast majority of Chile’s GDP industries. With respect to precipitation, it is found that a drop in precipitation negatively affects activity only in the Agricultural-forestry industry, revealing the heterogeneity in the impacts that climate change can generate in the Chilean economy. Additional exercises show that during the summer, the impact of higher temperatures and less precipitation on GDP is greater than in other seasons, in addition to the fact that when using maximum temperature data, the effects found in activity are exacerbated. Finally, it is found that heat waves and dry seasons exacerbate the aforementioned results.