The impact of climate change on economic output across industries in Chile

RESEARCH ARTICLE The impact of climate change on economic output across industries in Chile Karla Hernandez1, Carlos MadeiraID2* 1 University of Wisconsin-Madison, Madison, WI, United States of America, 2 Central Bank of Chile, Santiago, Chile * cmadeira@bcentral.cl Abstract Using region-industry panel data for Chile over the period 1985 to 2017, we find no effect of precipitation changes on GDP and a negative impact of higher summer temperatures on Agriculture-Silviculture and Fishing. An increase of one Celsius degree in the month of January implies a 3% and 12% GDP reduction in Agriculture and Fishing, respectively. There is also a negative effect of higher temperatures in January on Construction and Electricity, Gas, and Water. Our analysis suggests that climate change did not have a big impact on the Chilean economy during this period. Stress test exercises that select only the negative and statistically significant coefficients imply that the Chilean GDP would fall between -14.8% and -9% in 2050 and between -29.6% and -16.8% in 2100, according to our model. Introduction Climate change is predicted to affect negatively the economic growth of almost all the coun- tries across the world [1–3]. Since the negative consequences fall disproportionately on the poorest countries due to their proximity to the earth’s Equator, the impact on the average world GDP per capita could be as high as -20% [4]. It is estimated that the Latin America region will suffer substantially from global warming in the 21st century, with some Caribbean

countries being strongly affected due to their oceanic location and dependence on the agricul- ture and fishing sectors [5–7]. Due to its worst impact on the poorest countries [8] and the poorest households, climate change will be a significant threat to economic growth and reduc- ing income inequality in Latin American countries [7, 9]. Empirical estimates show that global warming reduced the GDP per capita of the poorest countries by 17–31% over the last half century, making it more difficult for poorer nations to converge towards developed economies and increasing inequality between countries [8]. This study provides a view of the economic impact of climate change in Chile over the past 35 years, focusing on its impact across different industries and regions. In the literature it has been challenging to provide systematic evidence that rising temperatures affect the growth rate of economic activities beyond sectors that are naturally exposed to outdoor weather conditions such as agriculture, fishing and construction [10–13]. Our work pres- ents a contribution relative to Colacito et al. (2019) [13], who make a similar analysis for the PLOS ONE PLOS ONE | https://doi.org/10.1371/journal.pone.0266811 April 28, 2022 1 / 21 a1111111111 a1111111111 a1111111111 a1111111111 a1111111111 OPEN ACCESS Citation: Hernandez K, Madeira C (2022) The impact of climate change on economic output across industries in Chile. PLoS ONE 17(4): e0266811. https://doi.org/10.1371/journal. pone.0266811 Editor: Carla Pegoraro, PLOS, UNITED KINGDOM Received: October 17, 2021

Accepted: March 28, 2022 Published: April 28, 2022 Peer Review History: PLOS recognizes the benefits of transparency in the peer review process; therefore, we enable the publication of all of the content of peer review and author responses alongside final, published articles. The editorial history of this article is available here: https://doi.org/10.1371/journal.pone.0266811 Copyright: © 2022 Hernandez, Madeira. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. Data Availability Statement: We published all the data in Mendeley Data: https://data.mendeley.com/ datasets/zyrdg56hzr/1 doi: 10.17632/zyrdg56hzr.1. Funding: The author(s) received no specific funding for this work.