Climate Change Vulnerability and Economic Growth in Gulf of Guinea Countries: Evidence Using the Long-Run Instrumental Variables Model

Abstract

The aim of this paper is to study the impact of vulnerability to climate change on economic growth. We address our concerns using Kripfganz and Sarafidis' (2021) long-term instrumental variable model. We then test the Kuznets Hypothesis (EKC) using the threshold model of Hansen (1999). Our study covers 10 countries for the period 1995-2020. Using Kripfganz and Sarafidis (2021) model, results show that vulnerability to climate change significantly increases economic growth at a 1% threshold of approximately 43.84%. Furthermore, nonlinear results using the Hansen (1999) model show that: (i) in lower regimes, a 1% increase in vulnerability significantly increases economic growth by 5.242% at the 5% threshold. (ii) Under the higher regime, a 1% increase in vulnerability significantly increases the 1% threshold increase by 5.856%. Therefore, the results of the Hansen (1999) model are consistent with those of the Kripfganz and Sarafidis (2021) model. These results are robust to sensitivity assessments and fixed effects estimates.