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Going NUTS: the regional impact of extreme climate events over the medium term

Author

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  • Fernandez, Guzman Gonzalez-Torres
  • Parker, Miles
  • Usman, Sehrish

Abstract

The projected increase in extreme climate events in the coming decades is likely to exacerbate the existing productivity and demographic challenges facing Europe. We study the dynamic, medium-run macroeconomic effects of heatwaves, droughts and floods in 1160 EU regions through the lens of a local projections, difference in difference framework. Summer heatwaves and droughts lower medium-term output, but the impact from floods depends on regional income levels. High-income regions witness reconstruction activity, less wealthy regions do not. We find evidence of population decline in affected regions as well as adaptation spending post-event, which lowers regional productivity. JEL Classification: D24, E24, J22, R11, Q54

Suggested Citation

  • Fernandez, Guzman Gonzalez-Torres & Parker, Miles & Usman, Sehrish, 2024. "Going NUTS: the regional impact of extreme climate events over the medium term," Working Paper Series 3002, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20243002
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    More about this item

    Keywords

    difference in difference; extreme climate; labour market; local projections; potential output; productivity; weather;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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