Climate Model Output in Economic Analyses of Climate Change

Economists are increasingly using weather data and climate model output in analyses of the economic impacts of climate change. This article introduces a set of weather data sets and climate models that are frequently used, discusses the most common mistakes economists make in using these products, and identifies ways to avoid these pitfalls. We first provide an introduction to weather data, including a summary of the types of datasets available, and then discuss five common pitfalls that empirical researchers should be aware of when using historical weather data as explanatory variables in econometric applications. We then provide a brief overview of climate models and discuss two common and significant errors often made by economists when climate model output is used to simulate the future impacts of climate change on an economic outcome of interest. JEL classification numbers and key words: Q54 [Climate Change, Impacts Estimation] 1 Auffhammer: [email protected]; Hsiang: [email protected]; Schlenker: [email protected]; Sobel: [email protected]. We thank Charlie Kolstad, four referees and Suzanne Leonard for very helpful comments. We acknowledge support from DOE grant DE-FG0208ER64640 (Auffhammer & Schlenker), EPA Grant FP-916932 (Hsiang) and NSF Grant AGS-1008847 (Sobel). All remaining errors are ours.