Climate change and economic growth in Brazil

ABSTRACT

Brazil has felt the effects of climate change through significant variability in precipitation resulting in droughts and floods (Grimm, Pal, and Giorgi 2007; Verner and Tebaldi, forthcoming). This article contributes to the literature by examining the impact of rainfall variations on GDP growth rates of Brazilian states. The estimates suggest that spring droughts as well as spring droughts combined with summer floods impact Northeastern Brazil most severely. Because the Northeast has historically been the most economically deprived region in the country, the results suggest that climate events could aggravate inequality throughout the nation.

KEYWORDS:

• Climate change
• economic growth
• inequality
• dynamic panel data models

JEL CLASSIFICATION:

• O40
• O54

Notes

¹ North, Northeast, Centralwest, Southeast, and South.

² Some states had missing data for specific years. However, to our knowledge this is the most comprehensive source for weather data in Brazil.

³ As a robustness check, we also estimate the models with current rainfall, without log-transformation for the rainfall variables, and with only one lag for real GDP growth rates. The results of these models are qualitatively and quantitatively similar and are available upon request.

⁴ The results are consistent with the fixed effects within estimator. Estimates are available upon request.

⁵ Full regression estimates are available upon request.