Temperatures and cyclones strongly associated with economic production in the Caribbean and Central America

Abstract

Understanding the economic impact of surface temperatures is an important question for both economic development and climate change policy. This study shows that in 28 Caribbean-basin countries, the response of economic output to increased temperatures is structurally similar to the response of labor productivity to high temperatures, a mechanism omitted from economic models of future climate change. This similarity is demonstrated by isolating the direct influence of temperature from that of tropical cyclones, an important correlate. Notably, output losses occurring in nonagricultural production (-2.4%/+1 degrees C) substantially exceed losses occurring in agricultural production (-0.1%/+1 degrees C). Thus, these results suggest that current models of future climate change that focus on agricultural impacts but omit the response of workers to thermal stress may underestimate the global economic costs of climate change.