Temperature Effects On Labor Productivity: A Cross-Country Approach

Temperature Effects on Labor Productivity: A Cross-Country Approach
Introduction
Intro into the topic

Hypothesis
I will test the hypothesis that higher temperature will adversely affect labor productivity in a country.
Outline

Purpose
The purpose of this paper is to check the effects of temperature on labor productivity to conclude that climate change will have a severe impact on labor productivity in the future. It can be thought of as a domino effect. To begin with, populations are increasing by 1.6% annually hence humans are producing more goods (UN 2013). To produce more goods we need more energy. Currently, the 85% of our energy comes from nonrenewable resources which in turn produces emissions (Boundless, 2016). Emissions add to the
Moreover, helps differentiate good methods from worse ones. On the macro level productivity tends to be consistent. So if there is a decrease in productivity then an economy will head toward downward spiral. However, if there is an increase in productivity then the economy will be heading toward an upward spiral. This makes sense a better use of resources will continue to increase productivity. As noted by Adam Smith “wealth is labor” however only “labor that adds value to another” can be turned in to wealth. Also, productivity in macro terms is the link of several industries that together create greater output. A factor of productivity that most don’t take into consideration is the depreciation of resources that diminish at different speeds through time. Once depreciated only an investment can bring the same resource back practice. Therefore, the correct calculation of depreciation of resources is important for future investments to be planned and not unexpected. This ties with capital allocation that must be effective for productivity to grow in an economy. Incorrect capital allocation will result in no growth or even a decline in productivity. Most importantly factor of productivity in the past century is an increase in technological innovations. However, just like capital, if technology is not allocated properly then its benefit will be lower (Matache
This paper was my original motivation to write about climate change effects on the world economy and presents concreate figures based on the Dynamic Integrated Climate-Economy (DICE). DICE is an integrated assessment model which in essence is a program that models the macro-economy and later forecasts effects of climate change on the world economy. With these forecasts policy makers are able to set emission targets and carbon prices. The main assumption of DICE is that present value of a portfolio of equities is the discounted cash flow of future dividends therefore in the long run dividends should grow at the rate of GDP. Hence, DICE will forecast how changes in climate change will affect GDP and consecutively cash flows from assets. This relationship is expected to hold up to year 2100 which is the last projection period of this study. This resonates with our initial purpose of the paper because not only are impacts of climate change on stock and non-financial capital assets measured but also the reduction of the amount of goods and services that can be produced with given inputs of capital and labor. For any projection model productivity growth is one of the most important aspects as it determines the rate of GDP growth. In this study the base productivity growth was .84% based on 200 years of data