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Weather Variations and International Trade

I investigate the relationship between weather variations and bilateral trade flows at the country, sectoral and product levels, worldwide, and over the 1992-2014 period. I find a negative effect of temperature variations on bilateral trade at the country level. At the product level, both negative and positive effects arise, but the negative effect dominates. The effects are on the agricultural and manufacturing sectors, especially in the textile and metals sectors. Possible channels are the effect of temperature on output and labour productivity. Precipitation variations have also an effect on the product level, with the positive effect dominating for the affected products. The results suggest that weather variations also affect bilateral revealed comparative advantages, mainly for the weather sensitive products that I identify in the analysis.

JEL codes: F14, F18, Q56.

Keywords: climate change, trade diversification, weather shocks.

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