The adverse consequences of global harvest and weather disruptions on economic activity

Extreme weather events are expected to increase with climate change. Such events are detrimental for local economic activity but could also affect countries that are not directly exposed through global agricultural production shortfalls and price surges. Here, estimations for 75 countries show that increases in global agricultural commodity prices caused by harvest or weather disruptions in other regions of the world significantly curtail economic activity. The impact is considerably stronger in advanced countries, despite relatively lower shares of food in household expenditures. Effects are weaker when countries are net exporters of agricultural products, have large agricultural sectors and/or are less integrated in global markets for non-agricultural trade. Once we control for these characteristics, the relationship between the country's income per capita and the economic repercussions becomes negative. Overall, these findings suggest that the consequences of climate change on advanced countries, particularly through food prices, may be larger than previously thought. Extreme weather events such as heatwaves and droughts are likely to occur more often under climate change. Such events can have an indirect effect on countries through global agricultural markets and food prices; this impact is stronger for higher-income than lower-income countries.