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Political ``Color" and the Impact of Climate Risks on Output Growth: Evidence from a Panel of US States

Author

Listed:
  • Xin Sheng

    (Lord Ashcroft International Business School, Anglia Ruskin University, Chelmsford, United Kingdom)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

  • Oguzhan Cepni

    (Ostim Technical University, Ankara, Turkiye; University of Edinburgh Business School, Centre for Business, Climate Change, and Sustainability; Department of Economics, Copenhagen Business School, Denmark)

  • Masego Motsuenyane

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

Abstract

In this paper we show that the effect of climate risks on economic growth in a panel of 48 contiguous states of the US is contingent on the party affiliation of the local politicians, as captured by a Democratic-Republican Index (DRI). Specifically, our results, based on a regime-dependent local projections model, depict that extreme weather-related shocks tend to negatively impact output growth more severely, especially in the medium- to long-run, in the Republican-leaning states with low-DRI values compared to those that are characterized by high-DRIs over the annual period of 1967 to 2023. In addition, when we incorporate the information on states that have undertaken explicit targets for reduction of Green House Gas emissions, following the Climate Change Action Plan implemented in 1993, we find that the significant long-horizon negative effect continues to hold only for the states with low-DRIs, i.e., are Republicans-oriented.

Suggested Citation

  • Xin Sheng & Rangan Gupta & Oguzhan Cepni & Masego Motsuenyane, 2024. "Political ``Color" and the Impact of Climate Risks on Output Growth: Evidence from a Panel of US States," Working Papers 202449, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202449
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    More about this item

    Keywords

    Severe weather; Output Growth; US States; Linear and Nonlinear Local Projections; Impulse Response Functions; Political Orientation;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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