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

the sectors that benefit from climate change increase their weight in the Chilean economy, while the negatively affected sectors cannot decrease their product below a GDP level of zero. In our worst forecasts, which apply only negative coefficients that are also statistically signifi- cant (that is, ignoring any potential positive effects), we then obtain an impact on the Chilean GDP level between -14.8% and -9% in 2050 and between -29.6% and -16.8% in 2100. That is, we only obtain a negative impact of climate change on the total Chilean GDP if we deliberately ignore any positive coefficients. A robustness exercise using the industry coefficients of a similar model estimated for the USA [13] would imply that Chile’s GDP would suffer a fall of at most 0.8% by 2050 and would increase substantially by 2100 due to the effects of climate change. However, a second robust- ness exercise that applies only the statistically significant coefficients estimated for the USA [13] would imply that the Chilean GDP would fall between -6.8% and -12.9% in 2050 and between -15.5% and -42.3% in 2100 due to climate change. Our estimates also imply a positive impact on the Chilean growth rate during the period 1985–2017 of +0.1% with all the model’s coefficients, a negative effect of -0.1% with just the statistically significant coefficients, and a negative effect of -0.2% with just the negative statisti- cally significant coefficients. Therefore it does not appear that climate change had an impact for Chilean economic activity in the past. Although there are other caveats, one that is directly

related to the estimation is that the annual frequency of the region-industry data makes it harder to measure the impact of climate change associated with just one month. Another issue that causes uncertainty in our results is that our model has fixed coefficients instead of time- varying parameters that consider the dynamic impacts of climate change over time. Neither issue can be solved in a model based only on an annual frequency panel dataset. One policy implications of this work is that more research is required for knowing whether the effects of climate change are permanent over the long term or not. Our work finds an impact of seasonal temperatures on the growth rate of the GDP of several industries and an effect on the growth rate may have large accumulated impacts over several years, as shown in our exercises for Chile and previous studies for the USA [13]. However, many industries may undertake investments to mitigate the effects of climate change, such as finding alternative energy sources or crops that are better suited to warmer weather [35]. Governments can also implement new regulations and build better infrastructure to adjust for the long run climate. Recent research, however, has found evidence of fairly negative effects of climate change on agriculture even after several decades [29, 36], showing that current adjustments may not be enough to mitigate the negative shock of global warming. It is therefore crucial for economic research to provide greater evidence on all the possible short-run and long-run effects of cli-

mate change on different industries and natural resources [37] in order to evaluate the value of environmental regulations and green investments [23]. Supporting information S1 Appendix. Panel-level heterogeneity and unit root tests. (PDF) S2 Appendix. Other model estimates. This appendix show some robustness checks using the same model of industry-region GDP with temperature and precipitation fluctuations with constant weights for each industry and different clustering options (clusters just by year or clusters by region-year). (PDF) PLOS ONE The impact of climate change on economic output across industries in Chile PLOS ONE | https://doi.org/10.1371/journal.pone.0266811 April 28, 2022 18 / 21