The Economic Effects of Long-Term Climate Change: Evidence from the Little Ice Age, 1500-1750

Understanding the economic effects of long-term and gradual climate change, when people have time to adapt, is a central question in the current debate on climate change. Empirical evidence, however, is scarce. I study the economic effects of climate change over a period of 250 years during the Little Ice Age, a historical episode of climate change, between 1500 and 1750. Historians have argued that relatively low temperatures during this period decreased agricultural productivity and economic growth. I test this hypothesis and provide econometric evidence of the economic effects of long-term adverse temperature changes during the Little Ice Age. Results indicate that, during this particularly cold period, further temperature decreases had an overall negative effect on city size in Europe. These results are robust to controlling for an array of geographical control variables and for alternative determinants of economic growth in Early Modern Europe. Further results indicate that cities with good access to trade were substantially less affected by temperature changes and that cities with relatively warm initial climate benefited from temperature decreases while cities in temperate and cold climates were negatively affected. Finally, I use yearly historical wheat prices and historical yield ratios to show that yearly temperature changes affected economic growth though its effect on agricultural productivity.