Does Hotter Temperature Increase Poverty and Inequality ? Global Evidence from SubnationalData Analysis

Despite a vast literature documenting the harmful effects of climate change on varioussocio-economic outcomes, little evidence exists on the global impacts of hotter temperature on poverty andinequality. Analysis of a new global panel dataset of subnational poverty in 134 countries finds that a one-degreeCelsius increase in temperature leads to a 9.1 percent increase in poverty, using the US$1.90 daily povertythreshold. A similar increase in temperature causes a 1.4 percent increase in the Gini inequality index. The paperalso finds negative effects of colder temperature on poverty and inequality. Yet, while poorer countries—particularlythose in South Asia and Sub-Saharan Africa—are more affected by climate change, household adaptation could have mitigatedsome adverse effects in the long run. The findings provide relevant and timely inputs for the global fight againstclimate change as well as the current policy debate on the responsibilities of richer countries versus poorer countries.