The Poverty Impact of Climate Change in Mexico

This paper examines the effects of
climate change on poverty through the relationship between
indicators of climate change (temperature and rainfall
change) and municipal level gross domestic product, and
subsequently between gross domestic product and poverty. The
evidence suggests that climate change could have a negative
impact on poverty by 2030. The paper proposes a two-stage
least squares regression where it first regresses
temperature and rainfall (along with geographic controls and
state and year fixed effects) on municipal gross domestic
product per capita for 2000 and 2005 The resulting gross
domestic product per capita is used in a second equation to
estimate municipal poverty on the same years. The authors
then incorporate projections of temperature and rainfall
changes by 2030 into the estimated climate-gross domestic
product coefficients to assess the effects of climate change
in economic activity and how this in turn will influence
poverty. At the same time, they account for the potential
adaptive capacity of municipalities through higher
population densities and economic growth. Both would reduce
poverty by 31.72 percentage points between 2005 and 2030
with changing climate. However, poverty could have been
reduced up to 34.15 percentage points over the same period
had there been no climate change. This suggests that climate
change slows down the pace of poverty reduction. An
alternative reading is that poverty is expected to increase
from 15.25 percent (without climate change) to 17.68 percent
(with climate change) by 2030. Given the existing population
projections for 2030, this represents 2,902,868 people
remaining in poverty as a result of climate change.