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

USA across states and industries. Our work advances upon the previous literature by show- ing a similar analysis for Chile. Chile is an interesting case, because it is a developing econ- omy with a much stronger relevance of the primary sectors in its output and it is located in the southern hemisphere which will be differently affected by climate change relative to the north [14, 15]. Using annual frequency GDP data for 12 economic sectors across 15 regions of Chile over the period 1985 to 2017, we find that temperature and rain precipitation fluctuations had little impact on economic activity, except for the Agriculture-Silviculture and Fishing sectors. Our econometric model has different coefficients for each industry and it includes as control variables the temperature and precipitation for each season (whether quarterly seasons or months) plus the industry-region growth lag, time fixed-effects at the year level, and fixed-effects for the regions. The model therefore accounts for both unobserved macro- economic shocks affecting each industry and unobserved heterogeneity at the region-indus- try level. Most studies for the impact of climate change on GDP use international level datasets with GDP for many countries and information on their temperatures and precipitation [2, 12, 16]. In this work, however, we use a dataset that is specific for Chile and its regions-industries. Therefore we apply a methodology similar to Colacito et al. (2019) [13] who also use state- industry data specific to the USA, finding that higher summer temperatures affected negatively

the economic output of at least half of the industries, especially finance, insurance and real estate. Using annual GDP growth data across 12 industries for each of the 15 Chilean regions over the last 35 years, we find a statistically significant impact of climate change during the Summer season for the Agriculture and Fishing sectors. Each Celsius degree of temperature increase in the months of January implies a GDP reduction of 3% and 12% for the Agriculture and Fishing sectors, respectively. However, many industries have either been unaffected or could even be getting a positive impact from the temperature increases implied by climate change. Furthermore, some impacts of the temperature increase can be positive for the eco- nomic output outside of the Summer months. Our main econometric results imply a low impact of climate change in Chile over the past 35 years. This is consistent with the previous literature showing that Chile so far has received little impact from climate change in terms of overall climate change costs [17], GDP costs [18], temperature fluctuations [2, 19], water availability [20] or labor hours lost to high temperatures [21]. Furthermore, studies such as Dell et al. (2012) [16] have found little effect so far of climate change in high income economies such as Chile, with negative effects being significant only for poorer nations. This work is related to the research on the economic costs of climate change, with a particu- lar emphasis on GDP [4, 12] and physical risks. Previous research for Chile shows that electric-

ity generation and manufacturing are the sectors with the highest carbon emissions in Chile, but using an input-output framework then the manufacturing and mining sectors (in particu- lar, their exports) are the highest indirect sources of carbon emissions [22]. Finally, climate change issues are gaining more relevance in Chile, as pension funds prefer investments with higher Environmental, Social and Governance (ESG) factors [23] and lower reliance on fossil fuels which are heavily used in Latin America [24]. Finally, Herna´ndez and Madeira (2021) [25] show a literature review about the impact of climate change in Chile in a wide range of aspects, from GDP to water availability and migration. This article is organized as follows. Sec- tion 2 details the data used and the econometric methodology. Section 3 comments on the empirical findings over the 1985–2017 period, while Section 4 summarizes the conclusions and implications for policy. 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 2 / 21 Competing interests: The authors have declared that no competing interests exist.