The Negative Effect of Temperature Variability on Household Wealth in Low- and Middle-Income Countries

Climate change distributes its negative impacts on societies unequally. Low- and middle-income countries (LMICs) are disproportionately affected by climate change, which threatens to undo global progress in poverty reduction. Temperature variability has been shown to reduce macro-economic growth and to negatively affect household wealth. Climate models predict that LMICs are located in areas that will experience the largest increases in temperature variability. Understanding the effects of an increasingly variable climate on social and economic outcomes is thus of key importance. Yet current literature on the link between temperature variability and poverty has limited geographical coverage, with evidence from many LMICs still missing. In addition, the data used in studies have tended to be at a low level of spatial disaggregation. This paper combines remote sensing temperature data from the Reanalysis Fifth Generation (ERA5) global climate dataset for 2018 and micro-estimates of relative household wealth at a 2.4 km spatial resolution predicted by machine learning (ML) algorithms from (Chi et al., 2022) in a Spatial First Differences (SFD) research design. We find a remarkably robust negative effect of increases in day-to-day temperature variability on household wealth across 89 LMICs. Our heterogeneity analysis shows that the magnitude of negative effects of day-to-day temperature variability on household wealth is largest in Sub-Saharan Africa, in low-income countries, and in tropical climates. Altogether our findings highlight the need to build climate resilience across LMICs, for instance through climate-responsive social protection programmes – particularly in the most affected geographies and climates.