The Impact of Climate Change on Productivity in India: Explorations with ARFIMA Model

The goal of the present study is to find out the impact of climate change (CC) along with a few other variables like expenditure on education (Edu), health (Hea), social security and welfare (SSW), and internet penetration (IntPene) on productivity viz., labour productivity (LP) and total factor productivity (TFP). Based on a priori reasoning, we can expect these variables signifying environmental (CC), social (Edu, Hea, SSW), and technological (IntPene) changes to impact productivity in the case of India. Leveraging data from various national and international sources, this study is anchored in a time-series analysis from 1992 to 2017 The study uses an autoregressive fractionally integrated moving average (ARFIMA) statistical technique and prepares two models, one with LP as a dependent variable and another with TFP as a dependent variable bringing out the profound impact of the environmental (CC), social (Edu, Hea, SSW) and technological (IntPene) factors on productivity. Our results indicate that CC impacts LP negatively and significantly. The impact of Hea and IntPene on productivity is positive and significant. However, the impact of Edu on both LP and TFP turns out to be negative and significant. The paper underlines the need for a mix of adaptive and preventive approaches to address the negative impact of CC on productivity. Besides this, technical adaptations, infrastructure and regulatory interventions are also recommended to raise LP. Public expenditure on SSW is hurting both LP and TFP. Therefore, the productivity-enhancing effect of such SSW policies needs to be seriously evaluated both by proponents and by sceptics.