| By: |
Yacouba Coulibaly (UO - Université d'Orléans, UCA - Université Clermont Auvergne) |
| Abstract: |
Developing countries suffer disproportionately from the negative impacts of
climate change and environmental degradation on economic development in terms
of financial costs and loss of potential revenues. In this paper, we examine
the impact of climate change on the efficiency of public investment in 34
developing countries, with a particular focus on resource-rich countries, over
the period 2000-2013. Using stochastic frontier analysis (SFA) to determine
efficiency scores, we find that developing countries could increase the
capital stock by 29% on average without changing their public investment
spending. In particular, resource-rich countries could increase the capital
stock by 26% without changing their spending. In the second step, we then use
the fractional regression model (FRM) to capture the impact of climate change
on the investment efficiency values obtained in the first step. Our results
show that climate change has a negative impact on public investment
efficiency. However, when the climate change index is disaggregated for the
regressions, we find that only precipitation has a negative effect, while a
1°C temperature increase in resource-rich countries leads to a 16.32%
improvement in public investment efficiency of GDP. These results are also
statistically and economically robust to different controls and
specifications. The main findings of this paper suggest that policies to
address climate change in general and heavy rainfall shocks in particular
should include strong provisions for financing more resilient public
investments to adapt to climatic conditions and modernise public
infrastructures to mitigate the negative environmental impacts for developing
countries, especially resource-rich countries. |
| Keywords: |
H81, C12, Q54, Q01, Climate change, Public investment, Technical efficiency, Weather shocks, Environment, Stochastic frontier analysis O13 |
| Date: |
2023–04–11 |
| URL: |
http://d.repec.org/n?u=RePEc:hal:journl:hal-04072345&r=res |