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International Trade and the Transmission of Temperature Shocks

Author

Listed:
  • Oliver Schenker

    (ZEW - Leibniz Centre for European Economic Research)

  • Daniel Osberghaus

    (ZEW - Leibniz Centre for European Economic Research)

Abstract

We examine how the adverse impacts of weather shocks are distributed through the trade network. Exploiting a rich, theoretically derived, fixed effects structure, we find significant negative short-run effects of high temperature on exports. A month with an average temperature above 30 $$^{\circ }\hbox {C}$$ implies export losses of around three percent. These effects are increasing in the labour-intensity of exports. Using our structural Gravity model, we assess the general equilibrium incidence of these temperature shocks. We find that equilibrium adjustments reduce the economic costs by around 20 percent, but significant costs arise also for countries not directly exposed to high temperatures.

Suggested Citation

  • Oliver Schenker & Daniel Osberghaus, 2025. "International Trade and the Transmission of Temperature Shocks," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 88(4), pages 965-1007, April.
    • Handle: RePEc:kap:enreec:v:88:y:2025:i:4:d:10.1007_s10640-025-00957-3
    DOI: 10.1007/s10640-025-00957-3
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    More about this item

    Keywords

    International trade; Temperature; Extreme weather; Structural Gravity;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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