Editing IPCC:AR6/WGII/Chapter-16 (section)

==== 16.2.3.8 Economic Impacts ====

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Since the AR5, there has been significant progress regarding the identification of economic responses to weather fluctuations: evidence has increased that ''extreme weather events'' such as tropical cyclones, droughts, and severe fluvial floods have not only caused substantial immediate direct economic damage ( ''high confidence'' , see ‘Coastal Systems—Damages, Table SM16.23, ‘Water distribution—Reductions in water availability + induced damages and fatalities’, Table SM16.23, and ‘Water distribution—Flood-induced economic damages’, Table SM16.22) but have also reduced economic growth in the short term (year of, and year after event) ( [[#Strobl--2011|Strobl, 2011]] ; [[#Strobl--2012|Strobl, 2012]] ; [[#Fomby--2013|Fomby et al., 2013]] ; [[#Felbermayr--2014|Felbermayr and Gröschl, 2014]] , Loyaza et al. 2012) ( ''high confidence'' ) as well as in the long term (up to 10–15 years after event) ( ''medium confidence'' ) ( [[#Hsiang--2014|Hsiang and Jina, 2014]] ; [[#Berlemann--2016|Berlemann and Wenzel, 2016]] ; [[#Berlemann--2018|Berlemann and Wenzel, 2018]] ; [[#Krichene--2020|Krichene et al., 2020]] ; [[#Tanoue--2020|Tanoue et al., 2020]] , see ‘Other societal impacts—Macroeconomic output’, Table SM16.23). Short- and long-term reductions of economic growth by ''extreme weather events'' affect both developing and industrialised countries, but have been shown to be more severe in developing than in industrialised economies, thereby increasing inequality between countries ( ''high confidence'' , see ‘Other societal impacts—Between-country inequality’, Table SM16.23). Further, ''extreme weather events'' have increased within-country inequality since poorer people are more exposed and suffer relatively higher well-being losses than richer parts of the population ( ''medium confidence'' , see ‘Other societal impacts—Within-country inequality’, Table SM16.23). Going beyond ''extreme weather events'' , economic production depends nonlinearly on temperature fluctuations: below a certain threshold temperature, economic production increases with temperature, whereas it decreases above a certain threshold temperature ( ''high confidence'' ) ( [[#Burke--2015|Burke et al., 2015]] ; [[#Pretis--2018|Pretis et al., 2018]] ; [[#Kalkuhl--2020|Kalkuhl and Wenz, 2020]] ; [[#Kotz--2021|Kotz et al., 2021]] ).

So far, there are few individual studies attributing observed economic damages to long-term climate change except for damages induced by river flooding, droughts and tropical cyclones (see ‘Coastal systems—Damages’, ‘Water distribution—Flood-induced damages’, and ‘Water distribution—Reduction in water availability + induced damages and fatalities’, Table SM16.22). In addition, the empirical findings on the sensitivity of macroeconomic development to weather fluctuations and ''extreme weather events'' have been used to estimate the cumulative effect of historical warming on long-term economic development (see ‘Other societal impacts—Macroeconomic output’, Table SM16.22): anthropogenic climate change is estimated to have reduced gross domestic product (GDP) growth over the last 50 years, with substantially larger negative effects on developing countries and in some cases positive effects on colder industrialised countries ( ''low confidence'' ) ( [[#Diffenbaugh--2019|Diffenbaugh and Burke, 2019]] ). Globally, between-country inequality has decreased over the last 50 years. Climate change is estimated to have substantially slowed down this trend, that is, increased inequality compared with a counterfactual no-climate-change baseline ( ''low confidence'' ) ( [[#Diffenbaugh--2019|Diffenbaugh and Burke, 2019]] ). On a regional level, decreasing rainfall trends in Sub-Saharan Africa may have increased the GDP per capita gap between Sub-Saharan Africa and other developing countries ( ''low confidence'' ) ( [[#Barrios--2010|Barrios et al., 2010]] ). Overall, more research is needed on the impact channels through which ''extreme weather events'' and weather variability can hinder economic development, especially in the long term.

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