How Much Will Global Warming Cool Global Growth?

Does a permanent rise in temperature decrease the level or growth rate of GDP in affected countries? Differing answers to this question lead prominent estimates of climate damages to diverge by an order of magnitude. This paper combines indirect evidence on economic growth with new empirical estimates of the dynamic effects of temperature on GDP to argue that warming has persistent, but not permanent, effects on growth. We start by presenting a range of evidence that technology flows tether country growth rates together, preventing temperature changes from causing country-specific growth rates to diverge permanently. We then use data from a panel of countries to show that temperature shocks have large and persistent effects on GDP, driven in part by persistence in temperature itself. These estimates imply projected future global losses of 8-13% of GDP from unabated warming, which is at least three to six times larger than level effect estimates and 25-70% smaller than permanent growth effect estimates, with larger discrepancies for initially hot and cold countries.