Economics Research Seminar Series: Mengheng Li
Business cycle and growth implications of climatic heat stress. Dr. Mengheng Li, UTS.
The wet-bulb global temperature (WBGT) is a robust measure of heat stress in various working environments. It is widely used by health authorities across the world to regulate working hours in extreme weather and thus affect the labour capacity -- the ratio of actual to contractual working hours. To test the labour capacity hypothesis, we study how WBGT affects the state final consumption in Australia via a reduced-form small panel autoregressive distributed lag model, and further develop a structural threshold unobserved components factor model to disentangle its short- and long-run effect. We find that a sufficiently large WBGT shock leaves permanent scars on the economy beyond its business cycle effect. To conduct welfare analysis, we propose a model with endogenous growth and labour capacity affected by heat stress based on our empirical findings.
