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Saturday, March 5, 2011

Jeffrey K. Lazo et al., J. Amer. Met. Soc. (2011), U.S. Economic Sensitivity to Weather Variability

Bulletin of the American Meteorological Society

U.S. Economic Sensitivity to Weather Variability

Jeffrey K. Lazo, Megan Lawson, Peter H. Larsen and Donald M. Waldman

Revised December 28, 2010


To estimate the economic effects of weather variability in the United States, we define and measure weather sensitivity as the variability in economic output attributable to weather variability, accounting for changes in technology and changes in levels of economic inputs (i.e., 
capital, labor, and energy). Using 24 years of economic data and weather observations, we developed quantitative models of the relationship between state-level sectoral economic output and weather variability for the 11 nongovernmental sectors of the U.S. economy; we used temperature and precipitation measures as proxies for all weather impacts. All 11 sectors are found to have statistically significant sensitivity to weather variability. We then held economic inputs constant and estimated economic output in the 11 estimated sector models, varying only weather inputs using 70 years of historical weather observations. We find that U.S. economic output varies by up to $485 billion a year of 2008 gross domestic product—about 3.4%—owing to weather variability. We identify U.S. states more sensitive to weather variability and rank the sectors by their degree of weather sensitivity. We discuss how this work illustrates a valid approach to measuring the economic impact of weather variability, gives baseline information and methods for more detailed studies of the sensitivity of each sector to weather variability, and lays the groundwork for assessing the value of current or improved weather forecast information given the economic impacts of weather variability.


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