The role of climate adaptation readiness in economic growth and climate change relationship: An analysis of the output/income and productivity/institution channels

Abstract

Although, climate change produces a wide range of effects, including output, institution, conflict, investment and etc., there is little knowledge on whether adapting to climate change could produce effects beyond the level of income to include other non-economic channels. This study examines whether the effect of climate change on economic growth and political stability (measure for productivity growth) depends on the level of climate adaptation readiness, using data from 44 African countries. We conducted several robustness checks to identify the relationship of interest. The result confirms that increases in temperature exert significant negative effect on economic growth and productivity growth, but these effects critically depend on the level of adaptation readiness. For countries with enhanced adaptation capacity, we find that it is possible for them to see a resurgence in their economic growth after a rise in temperature. However, for countries with low capacity to adapt, climate change might produce permanent damages on economic growth and productivity growth. Thus, in Africa, beyond the level of income, the quality of institution is another channel through which climate change could affect economic growth. Integrating climate adaptation into development agenda is critical, but they should be pro-poor in nature.