Climate Change and Long-term Economic Impact : Analysis of Swedish Counties

Abstract: Climate change poses a significant challenge to economies throughout the world; understanding its potential economic impacts at the regional level is important for making informed policy decisions and mapping out effective adaptation strategies. This thesis examines the long-run effect of climate change in Sweden, an environmentally diverse, developed country with ambitious sustainability goals. By using a half-panel Jackknife Fixed Effect (HPJ-FE) method that estimates the effect of deviations in temperature and precipitation from long-run historical norms on the growth of different county-level economic performance indicators between 1968 and 2021. The study suggests that deviations in temperature have a positive effect on the growth rates of real GRP, real GRP per capita, and employment in Sweden, while productivity sees a negative effect. The results are compared to the United States and suggest that Sweden is seeing fewer negative effects and adapting faster to climate change than the United States.