Is climate change a source of economic disparities between regions in Benin? Evidence from the spatial effects analysis method

Abstract

Despite numerous studies on the impacts of climate change in developing economies, scarce research focuses on these spatial effects in the internal regions of these countries. To shed light on this concern, this study aims to analyze the spatial effect of climate change on regional economic disparities in the context of Benin. The secondary data are extracted from the World Bank’s Climate Knowledge Portal and a Beninese local finance database covering the period from 2010 to 2019. A random-effects panel model and a dynamic spatial Durbin model of endogenous growth are used. The results reveal that, in the absence of spatial effects, average temperature reinforces economic disparities by 4.4 points within regions. A one-point increase in precipitation increases economic disparities by 0.001 points. The spatial model reveals both short- and long-term positive spatial externalities. Thus, a one-point positive variation in precipitation in neighboring regions leads to a 0.005% increase in a given region’s own revenue per capita. Similarly, a one-point increase in precipitation in a given region induces a 0.004% rise in own revenues in neighboring regions. Damage caused by climate change in one area encourages positive economic dynamics in neighboring areas. These spatial interactions reinforce economic differences and maintain economic disparities between Benin’s regions.