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Precipitation, Profits, and Pile-Ups

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  • Andrew Leigh

Abstract

In considering the economic impacts of climatic changes, economists frequently use annual national income as a proxy for social welfare. I show that such studies suffer from a significant bias, arising from the fact that such models typically ignore changes in mortality rates. Using panel data from Australia, I show that rainfall lowers traffic deaths, suggesting that the standard approach may underestimate the true economic cost of droughts.

Suggested Citation

  • Andrew Leigh, 2009. "Precipitation, Profits, and Pile-Ups," CEPR Discussion Papers 629, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    • Handle: RePEc:auu:dpaper:629
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    File URL: https://www.cbe.anu.edu.au/researchpapers/CEPR/DP629.pdf
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    References listed on IDEAS

    as
    1. Lan Lu & David Hedley, 2004. "The impact of the 2002-03 drought on the economy and agricultural employment," Economic Roundup, The Treasury, Australian Government, issue 1, pages 25-43, April.
    2. Mark Horridge & John Madden & Glyn Wittwer, 2003. "Using a highly disaggregated multi-regional single-country model to analyse the impacts of the 2002-03 drought on Australia," Centre of Policy Studies/IMPACT Centre Working Papers g-141, Victoria University, Centre of Policy Studies/IMPACT Centre.
    3. Robert A Buckle & Kunhong Kim & Heather Kirkham & Nathan McLellan & Jared Sharma, 2002. "A structural VAR model of the New Zealand business cycle," Treasury Working Paper Series 02/26, New Zealand Treasury.
    4. Sardar Islam & Matthew Clarke, 2002. "The Relationship between Economic Development and Social Welfare: A New Adjusted GDP Measure of Welfare," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 57(2), pages 201-229, February.
    5. Philip D. Adams & Mark Horridge & John Madden & Glyn Wittwer, 2002. "Drought, Regions and the Australian Economy between 2001-02 and 2004-05," Centre of Policy Studies/IMPACT Centre Working Papers g-135, Victoria University, Centre of Policy Studies/IMPACT Centre.
    6. Adams, P.D & Horridge, M & Madden, J.R & Wittwer, G, 2002. "Drought, regions and the Australian economy between 2001-02 and 2004-05," Australian Bulletin of Labour, National Institute of Labour Studies, vol. 28(4), pages 231-246.
    7. Edgardo Sica, 2005. "Climatic differences and Economic Growth across Italian Provinces: First Empirical Evidence," Quaderni DSEMS 20-2005, Dipartimento di Scienze Economiche, Matematiche e Statistiche, Universita' di Foggia.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Pavel A. Yakovlev & Christina M. Orr-Magulick, 2018. "On the road again: traffic fatalities and auto insurance minimums," Public Sector Economics, Institute of Public Finance, vol. 42(1), pages 45-65.
    2. repec:ipf:psejou:v:42:y:2018:i:42:p:45-65 is not listed on IDEAS

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    More about this item

    Keywords

    national income; social welfare; rainfall; traffic fatalities;
    All these keywords.

    JEL classification:

    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • J17 - Labor and Demographic Economics - - Demographic Economics - - - Value of Life; Foregone Income
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

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