A Vulnerability Index for U.S. State Economies: Climate Change Impacts on GDP
This study examines how short-term variations in temperature and precipitation affect the economic resilience of U.S. states, using quarterly real GDP as the outcome of interest. To address this, we adopt the single-index polymorphic production function from Turvey, Du, He, and Ortiz-Bobea's (2021) study on vulnerability indices for crops under climate change, adapting this polymorphic production function for the analysis of state level economic vulnerability. This approach offers significant advantages in assessing economic vulnerability to climate change, as it utilizes a single index to capture a range of climate responses, including plateau effects. Specifically, it identifies plateau effects within the relationship between state level economic production and weather conditions, while also providing fits that are consistent with higher-order polynomial modeling. To capture climate-independent factors, we include quarterly averages of temperature, and quarterly cumulative precipitation. As the dependent variable, we focus on quarterly real GDP. The paper also illustrates the computation of this index and discusses its potential use as a critical policy tool for understanding and mitigating economic vulnerability to climate change.