Does a Hot Climate Hinder Economic Development?

For decades, economists have wrestled with this question. One striking pattern is difficult to ignore: many of the world’s high-income economies are located in relatively temperate regions, while a large number of low- and lower-middle-income countries are situated in warmer and tropical parts of the world.

This raises an uncomfortable question: Does a hot climate hinder economic development?

The answer is more complicated than a simple yes or no. Climate does not determine a country’s economic destiny. Institutions, education, technology, political stability, healthcare, infrastructure and history all play major roles in shaping development.

Yet a growing body of research suggests that extreme heat can impose significant costs on economies. It can reduce labour productivity, affect agricultural output, increase health risks and place disproportionate pressure on poorer households. The issue, therefore, may not be whether hot countries can become prosperous- they clearly can, but whether rising temperatures make economic development more difficult and more expensive.

One of the most influential studies on the subject was published in Nature in 2015 by economists Marshall Burke, Solomon Hsiang and Edward Miguel. Using data from 166 countries between 1960 and 2010, the researchers found a non-linear relationship between temperature and economic production. Their analysis suggested that economic productivity peaks at an annual average temperature of around 13°C, and declines as temperatures rise beyond that point. The relationship was observed in both agricultural and non-agricultural economic activity and across rich and poor countries.

That does not mean cold countries are automatically rich and hot countries are automatically poor. Rather, the research points towards a relatively favourable temperature range for human productivity and economic activity. As temperatures move further into extremes, the physiological and economic costs of working and producing can rise.

And this matters because climate change is pushing temperatures upward.

Perhaps the most immediate economic consequence of extreme heat is its effect on workers.

When temperatures and humidity rise, the human body has to work harder to regulate its internal temperature. Heat stress can cause fatigue, dehydration and impaired physical and cognitive performance.

For an office worker with air conditioning, remote work or flexible hours, the consequences may be manageable. For a construction worker, agricultural labourer, rickshaw puller, street vendor or transport worker, they can be very different. For many informal workers, there is no paid leave for an exceptionally hot day. If they stop working, they may lose the day's income.

The International Labour Organization (ILO) estimated that, under a scenario of 1.5°C global warming, heat stress could result in the equivalent of 2.2% of total working hours being lost worldwide by 2030 equivalent to around 80 million full-time jobs. The ILO also noted that agriculture and construction are among the sectors particularly exposed to heat stress.

Extreme heat, therefore, is not simply a matter of discomfort. It is a labour-market issue. And ultimately, it is an economic issue. There is another dimension that is easy to overlook: inequality. A wealthy household can often respond to extreme heat by using air conditioning, improving insulation, accessing healthcare or changing working hours. A low-income household may have none of those options. This means that the economic consequences of heat can be highly unequal.

A 2024 World Bank study using subnational data from 137 countries found that a 1°C increase in temperature was associated with a 17.1% increase in poverty when poverty was measured using the US$2.15-a-day threshold. The study also found a 1°C increase associated with a 1.1% rise in the Gini inequality index. The authors caution that the effects vary across regions and that household adaptation can mitigate some of the damage over time.

The broader lesson is important. Those who are most exposed to extreme heat are often the people with the fewest resources to protect themselves from it.

Climate change can therefore deepen existing economic inequalities rather than simply creating a new environmental problem. The consequences are particularly important for countries that remain significantly dependent on agriculture. Crop production is sensitive to temperature, rainfall and water availability. Excessive heat can disrupt crop growth and reproduction, while heat and water stress can also increase vulnerability to pests and disease.

When agricultural production falls, the consequences extend beyond farmers. Lower yields can affect food prices and household incomes. Poor nutrition can affect children's health. Reduced household income can affect whether children remain in school. A climate shock that initially appears to be an agricultural problem can therefore become a human-capital problem.

The Burke-Hsiang-Miguel research also found temperature-related effects across both agricultural and non-agricultural economic activity, suggesting that the relationship between climate and productivity is broader than farming alone.

Heat also interacts with public health. Warm and humid conditions can influence the transmission of certain infectious and vector-borne diseases. When disease burdens rise, economies can lose working days, households can face higher medical expenses, and children may lose valuable time in school.

But once again, climate is only part of the story. Healthcare systems, sanitation, housing, public-health programmes and government capacity determine how effectively societies can manage climate-sensitive health risks.

Two countries with similar temperatures can therefore experience very different outcomes. That is why geography alone cannot explain development. This brings us to one of the oldest debates in development economics. 

How much of a country's prosperity is explained by geography, and how much by its institutions?

The influential work of economists Daron Acemoglu, Simon Johnson and James A. Robinson placed considerable emphasis on institutions including property rights, the rule of law, accountability and state capacity as fundamental determinants of long-term economic development.

The implication is important: being located in the tropics does not automatically make a country poor. At the same time, geography can influence historical trajectories, including patterns of colonialism, disease, agriculture and institution-building.

The more useful question, therefore, may not be whether geography or institutions matter more. It may be how geography and institutions interact. There is plenty of evidence that a hot climate is not an inevitable barrier to prosperity. Singapore, Qatar, the United Arab Emirates and Brunei are all examples of economies that have achieved high levels of income despite hot climates.

Technology, capital, infrastructure, healthcare, irrigation and effective public policy can all help societies adapt. But this creates an important paradox. The richer a country is, the more resources it may have to protect itself from extreme heat. And the poorer it is, the harder adaptation can be.

This can create a vicious cycle from Extreme heat to lower productivity to lower income to lower capacity to invest to weaker adaptation to greater losses. That cycle does not automatically occur everywhere. But where economic vulnerability and climate exposure overlap, it can become particularly difficult to break.

For Bangladesh, this is not an abstract academic debate. The country combines a hot and humid climate with high population density, a large informal labour force, substantial agricultural activity and significant exposure to climate-related hazards.

The World Bank's report An Unsustainable Life: The Impact of Heat on Health and the Economy of Bangladesh provides a striking picture. According to the World Bank, Bangladesh's maximum temperature increased by about 1.1°C between 1980 and 2023, while the country's “feels like” temperature reflecting the combined effect of heat and humidity increased by approximately 4.5°C over the same period.

The economic consequences are already measurable. The World Bank estimates that heat-related physical and mental health conditions resulted in around 250 million lost workdays in Bangladesh in 2024, with an estimated economic cost of up to US$1.78 billion, equivalent to roughly 0.4% of GDP.

Those numbers change the way we should think about heat. A heatwave is not simply an uncomfortable spell of weather. For a construction worker, a rickshaw driver, an agricultural labourer or a street vendor, extreme heat can directly affect the ability to work. And when the ability to work is reduced, income is reduced. When income is reduced, household resilience is reduced. The economic effects can then spread far beyond the individual worker.

What should Bangladesh do?

The answer cannot simply be to tell people to “stay cool”. Bangladesh needs to treat extreme heat as a public-health, labour and economic-development challenge.

First, heatwaves should be integrated into public-health planning and early-warning systems. 

Second, workers exposed to extreme heat need practical protections: access to drinking water, shaded rest areas, adequate breaks and adjustments to working hours during periods of dangerous heat. 

Third, cities need to be designed with heat in mind. Green spaces, water bodies, better ventilation, appropriate building design and urban planning can all contribute to reducing heat exposure.

Fourth, agriculture needs greater investment in heat-resilient crops, efficient irrigation and timely weather and climate information.

And finally, climate adaptation needs to be treated as an investment in economic productivity not as an optional environmental expense. The cost of adaptation may be significant. But the cost of failing to adapt may be greater.

So, does a hot climate hinder economic development? The evidence suggests that extreme heat can create a significant economic burden. It can reduce labour productivity, affect agricultural production, increase health risks and disproportionately hurt people with fewer resources to adapt. But it would be equally misleading to argue that climate alone explains why some countries are poor.

Institutions matter. Technology matters. Education matters. Healthcare matters. Infrastructure matters. And the capacity of a state and its people to adapt matters.

Perhaps the relationship is best understood not as a single cause-and-effect equation, but as an interaction: Geography into Institutions into Technology into Human Capital.

A hot climate does not determine a country's destiny. But when extreme heat meets weak infrastructure, limited resources and low adaptive capacity, it can become another obstacle standing in the way of development. And in a warming world, that obstacle is likely to matter most to those who have the fewest resources to overcome it.

For Bangladesh, the question is therefore no longer simply whether the climate is getting hotter. The more important question is: Can we build an economy resilient enough to keep growing as the heat rises?
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The writer is a development communication expert. She can be reached at [email protected]