November 2018– October 2021

Climate impacts on socioeconomic development


Potsdam-Institut für Klimafolgenforschung, Ifo Institute for Economic Research

Floods, tropical cyclones, heatwaves, and droughts cause not only substantial direct damages but also have the potential to deteriorate socio-economic development perspectives in the long-term. The SLICE project aims to combine econometric methods and dynamic, process-based modelling from the household to the macroeconomic perspective to gain a deep process-based understanding of how climate extremes impact socio-economic development.

Climate Analytics’ focus of work in the project lies in the empirical study of impacts of climate-related disasters. More precisely we analyse how households in low-income countries are impacted by climate-related shocks and extreme events.

We combine multiple rounds of large household surveys to identify which shocks households report as problematic, and combine this information with spatial information on key risk indicators provided from historical observations and consistent cross-sectorial impact projections. In selecting the case study countries, we take care to analyse a diverse set of climate related shocks such as droughts and floods, heat or cold extremes and cyclones. Controlling for household characteristics such as wealth, education, gender and health, we analyse the impact of these shocks on household well-being and coping capabilities across different population groups.

Combining multiple rounds of household-level data for a particular country allows us to better capture trends and dynamics over time, in addition to social and non-economic ones (e.g. education and health effects). Using the results from the analysis of historical observations and consistent cross-sectorial impact projects on future climate risks, we plan to also provide estimates of future impacts on household well-being for differing policy scenarios for each of the selected countries. Ultimately, in comparing results across case study countries, we hope to gain key insights into common climate impact patterns for households.

Based on these insights, we aim to gain a deeper understanding of the channels and mechanisms which translate immediate impacts of extreme events on households into long-term consequences for economic development and poverty levels such as delaying investments into health and education after an extreme event due to short-term consumption needs.