The GDP Temperature Relationship

Hotter countries tend to be poorer. In 97 countries studied recently the relationship is both distinct and powerful. A simple cross-section regression of the log of per capita GDP against the log of average temperature in the capital city shows that temperature explains more than forty-five percent of the variance in income. A one percent increase in temperature is associated with a decrease in per capita GDP of between 2.0 and 3.5 percent.

Why care? Two reasons.
1 - Global warming. The interpretation with the strongest implications predict that a 2 degree Fahrenheit increase in average temperatures will lead to a 7.7 percent decrease in U.S. GDP and a 7.4 percent decrease in total GDP among the 97 countries in the data presented here.

2. The theory presented is a significant departure from any of the conventional wisdom about the economic disparity between the “developed” and the “developing” worlds

The Relationship between GDP and Temperature. A new study

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=267352