Climate change effects on economic growth: mixed empirical evidence

Abstract

West Africa is vulnerable to the effects of climate change. This paper analyzed the impacts of climate change on economic growth in Anglophone West Africa with similar background, during the periods 1969-2016. Five growth model equations have been developed to incorporate climate change variables into the model. Panel data estimations such as the fixed effect model, random effect model and Hausman test were used. The results generated show that four equations required the use of the fixed effect, the agriculture equation model required the use of the random effect model. In the fixed effect models, the results show that the growth of human capital has a negative (-0.08 and -0.23) and significant (0.09* and 0.023*) impact on the growth rate of the services and manufacturing sectors. In Anglophone West African countries, the growth rate of the agriculture sector and temperature are statistically significant (0.008 ** and 0.089*) and have a negative impact (-2.04 and -17.7) on the growth rate of GDP. In the random effect model for agriculture, the growth rate of rainfall has the highest impact on the growth of agriculture in Anglophone West Africa than the impact of temperature on the region. Lack of sufficient rainfall reduces the growth of the agriculture sector. In relative terms, change in rainfall pattern is more harmful to agriculture in comparison to the change in temperature in this region. The consequences of climate change in the region are sluggish economic performance and growth, underdevelopment, poverty, and human misery.