Flexible Damage Functions

Author

James Rising, Sebastian Cadavid Sanchez, Climate Impact Lab

Published

September 14, 2026

0.1 Labor: Combined Country Collapsed

Flexible damage function parameters at the Country level.

Outcome units: mins_per_worker_per_day. Change in productive minutes per worker per day for all workers attributable to climate change, rebased to 2005 baseline. Negative = productivity loss; positive = gain. The IR-level nc4 attribute mislabels this as portion but the values match the projection system’s mins/worker/day pop-aggregated convention.

\[D_{it} = (\alpha_i T_t + \beta_i T_t^2) \cdot Y_{it}^{\gamma}\]

where \(\gamma\) is the income elasticity (fitted globally), \(\alpha_i\) is the linear coefficient, and \(\beta_i\) is the quadratic coefficient.


1 Global Estimation

1.1 Income Elasticity Estimation

The income elasticity \(\gamma\) is estimated using a fixed-effects regression:

\[y_{it} = \gamma \cdot \log(Y_{it}) + \mu_{g(i,T)} + \nu_t + \varepsilon_{it}\]

where \(\mu_{g(i,T)}\) are region-by-temperature-bin fixed effects and \(\nu_t\) are year fixed effects.

Table 1: Income Elasticity (Gamma) Estimation Results
Statistic Value
Income elasticity (\(\gamma\)) 0.4057
Standard error 4.87e-02
95% CI [0.3103, 0.5010]
R-squared 0.9877
Observations 83,790
Regions 245
Gamma quantiles 19

2 Parameter Distributions

2.1 8-Panel Summary

Row 1: gamma, alpha, beta, rsqr1. Row 2: rho, zeta, eta, rsqr2.

Using median gamma: 0.405660, 245 rows (of 4,655 total)
Figure 1: Distribution of Regional Parameters

2.2 Projection Equation and Parameter Definitions

The estimated parameters are used to project damages via Monte Carlo sampling:

\[D_{it}^k = (\hat{\alpha}_{ik} T_t + \hat{\beta}_{ik} T_t^2) Y_{it}^{\hat{\gamma}_k} + \hat{\theta}_{ik} T_t Y_{it}^{\hat{\gamma}_k} + \hat{\phi}_{it}^k\]

where \(k\) indexes the Monte Carlo draw. The parameters in each row of the output CSV control distinct components of this equation:

  • gamma: income elasticity \(\hat{\gamma}_k\), one of 19 quantile values drawn from \(N(\hat{\gamma}, SE(\hat{\gamma}))\)
  • alpha, beta: linear and quadratic temperature coefficients; \(\hat{\alpha}_{ik}\) and \(\hat{\beta}_{ik}\) are drawn from the joint normal defined by the VCV below
  • sigma11, sigma12, sigma22: variance-covariance matrix of \((\alpha, \beta)\), used for joint uncertainty sampling
  • rho: correlation between regional and global polynomial residuals \(\rho_i\), used to maintain spatial covariance across regions in Monte Carlo draws
  • zeta: temperature-dependent error scale \(\zeta_{ik}\); the run-specific error term \(\hat{\theta}_{ik}\) is drawn from \(N(0, \zeta_{ik})\)
  • eta: residual noise standard deviation \(\eta_{ik}\); the annual noise \(\hat{\phi}_{it}^k\) is drawn from \(N(0, \eta_{ik})\)
  • rsqr1, rsqr2: polynomial fit quality and error model fit, respectively

2.3 Summary Statistics

Table 2: Regional Parameter Summary
Parameter Mean Median Std Min Max N
alpha -0.004754 0.002776 0.03041 -0.2355 0.04735 245
beta -0.00319 -0.001784 0.003695 -0.02094 -0.0001396 245
rho 0.2144 0.222 0.2118 -0.524 0.6299 245
zeta 0.00429 0.0007304 0.0105 0.000121 0.07869 245
eta 0.00381 0.001097 0.007362 0.000163 0.04539 245
rsqr1 0.8279 0.8759 0.149 0.2723 0.9925 245
rsqr2 0.6624 0.6434 0.1296 0.3835 0.9547 245

3 Spaghetti Curves

Regional damage function curves showing D(T) = αT + βT² for sampled regions.

Figure 2: Regional Damage Functions

4 Zero Crossings

The zero crossing (extremum) of the parabola occurs at \(T^* = -\alpha / (2\beta)\).

Table 3: Zero Crossing Statistics
Category Count Percentage
β = 0 (no crossing) 0 0.0%
T > 20°C (beyond graph) 0 0.0%
T < 0°C (negative crossing) 82 33.5%
Valid crossings (0-20°C) 163 66.5%
Figure 3: Distribution of Zero Crossing Temperatures

5 Slope Analysis

Maximum slope between 0 and 10°C: \(\frac{dM}{dT} = \alpha + 2\beta T\)

The maximum occurs at either T=0 or T=10 (endpoints of interval).

Figure 4: Distribution of Maximum Slopes (0-10°C)

Convexity analysis omitted (beta constraint active).


6 R-squared Analysis

6.1 Polynomial Fit Quality (rsqr1)

Figure 5: Regional Fit Quality (R-squared)

6.2 Error Model R-squared (rsqr2) Quantiles

Table 4: rsqr2 Quantiles
0% (Min) 25% 50% (Median) 75% 100% (Max)
0.3835 0.5766 0.6434 0.7532 0.9547

7 Modelled Variance

Modelled variance statistic: \(1 - \frac{\sum_i \eta_i^2}{\sum_i D_i^2}\)

Table 5: Modelled Variance Statistics
Statistic Value
Modelled variance 0.9947
Sum(η²) 0.0168
Sum(D²) at T=3.0°C 3.1848
N regions 245

8 Best- and Worst-Fitting Regions

The 3 worst- and 3 best-fitting regions by R-squared, with raw simulation data overlaid on the fitted polynomial curve. Red rows = worst fits, green rows = best fits.

Table 6: Best- and worst-fitting regions
Top 3 best fit (R²)   Top 3 worst fit (R²)
Region α β η R²
ARE -0.00705 -0.00362 0.00119 0.993
QAT -0.00475 -0.00253 8.05e-4 0.992
AGO 0.00941 -0.00624 0.00104 0.99
LUX 0.00173 -3.77e-4 3.25e-4 0.272
LSO 0.0324 -0.00654 0.00578 0.314
UKR 0.00508 -0.00114 0.00123 0.318
Figure 6: Fitted polynomial with raw data for worst-fitting regions

9 Regional Parameter Maps

Maps of key parameters at the country level. Red = negative (damage increases with T), Blue = positive.

9.1 Alpha (Linear Coefficient)

Alpha (\(\alpha\)) represents the linear sensitivity to temperature. Regions with negative alpha experience damage that increases with the first degree of warming.

Figure 7: α (linear coefficient)

9.2 Beta (Quadratic Coefficient)

Beta (\(\beta\)) represents the curvature of the damage function.

The concavity (\(\beta \leq 0\)) constraint is enforced for this sector, meaning optimal temperature exists, damages accelerate beyond it.

Figure 8: β (quadratic coefficient)

9.3 R-squared (Fit Quality)

\(R^2\) measures the polynomial fit quality. Higher values indicate that the quadratic form captures more of the variance in the data.

Figure 9: R² (stage 1 fit quality)

10 F2: Flex vs Raw Comparison

Comparison of flexible damage function predictions against raw simulation means.

For each scenario (RCP × SSP × Model), we compute at the final year:

  • Flex predicted: \((\alpha \cdot T + \beta \cdot T^2) \cdot Y^\gamma\)
  • Raw actual: The outcome variable (y) from the source data

Year 2099: 1,012 rows

Correlation: 0.9398 | RMSE: 1.532686 | Sign agreement: 92.2%

Top 5 best predicted   Top 5 worst predicted
Year 2099 · Tmean across these regions: 1.96°C
Region Raw Flex Residual
KIR -0.626 -0.627 -0.00122
COG -0.753 -0.754 -0.00156
KEN -0.244 -0.247 -0.00296
GRC -0.367 -0.374 -0.00714
TJK -1.32 -1.33 -0.00986
BFA -6.05 -16.1 -10.1
NER -7.01 -16.7 -9.68
DJI -3.9 -12.2 -8.32
TCD -5.96 -14.1 -8.15
MRT -5.64 -11.4 -5.72

Correlation: 0.9737 | RMSE: 0.411584 | Sign agreement: 95.5%

Top 5 best predicted   Top 5 worst predicted
Year 2099 · Tmean across these regions: 1.96°C
Region Raw Flex Residual
LBN -0.457 -0.458 -7.48e-4
BEN -3.68 -3.68 0.00116
ECU -1.06 -1.06 -0.00124
KAZ 0.0384 0.0334 -0.00497
BTN 0.485 0.479 -0.00584
SOM -3.8 -7.63 -3.83
IRQ -4.51 -6.24 -1.74
ERI -1.85 -3.51 -1.66
SDN -6.95 -8.39 -1.44
BHR -3.65 -4.76 -1.11

Correlation: 0.9495 | RMSE: 3.215165 | Sign agreement: 98.0%

Top 5 best predicted   Top 5 worst predicted
Year 2099 · Tmean across these regions: 4.20°C
Region Raw Flex Residual
TUV -1.35 -1.35 0.00186
HUN -0.865 -0.862 0.00318
AUS -0.154 -0.16 -0.00529
ISR -2.12 -2.12 -0.0056
USA -1.05 -1.04 0.00656
BFA -19.6 -39.2 -19.6
DJI -13 -29.8 -16.8
TCD -18.4 -33.3 -14.9
NER -21.7 -36.2 -14.5
GIN -6.64 -18.8 -12.1

Correlation: 0.9784 | RMSE: 1.383021 | Sign agreement: 96.7%

Top 5 best predicted   Top 5 worst predicted
Year 2099 · Tmean across these regions: 4.20°C
Region Raw Flex Residual
CXR 0.783 0.78 -0.00312
USA -1.15 -1.15 0.00336
IMN 1.17 1.17 -0.00578
NIU 0.693 0.687 -0.00651
MUS 0.341 0.349 0.00837
BFA -24.5 -17.8 6.7
TCD -22.9 -17.2 5.74
DJI -18.2 -12.7 5.44
NER -24.9 -19.6 5.23
SOM -12.5 -17.4 -4.87

10.1 Scenario Summary

Table 7: Fit statistics across all 12 scenarios
RCP SSP Model N Corr RMSE Sign%
rcp45 SSP3 high 245 0.9398 1.53269 92.2%
rcp45 SSP3 low 245 0.9737 0.411584 95.5%
rcp85 SSP3 high 245 0.9495 3.21516 98.0%
rcp85 SSP3 low 245 0.9784 1.38302 96.7%

11 Data Reference

11.1 File Locations

Item Path
Regional CSV /project/cil/gcp/flex_damage_funcs/parameters/labor__combined_country_collapsed__regional_parameters.csv
Global JSON /project/cil/gcp/flex_damage_funcs/parameters/labor__combined_country_collapsed__global_results.json
Metadata JSON /project/cil/gcp/flex_damage_funcs/parameters/labor__combined_country_collapsed__metadata.json

11.2 Column Definitions

Column Description
region Region identifier (hierarchical code, first 3 chars = country ISO3)
gamma Income elasticity quantile value
alpha Linear temperature coefficient
beta Quadratic temperature coefficient
sigma11 Var(alpha)
sigma12 Cov(alpha, beta)
sigma22 Var(beta)
rho Correlation with global residual process
zeta Temperature-dependent heteroskedasticity
eta Residual standard deviation
rsqr1 R-squared of polynomial fit
rsqr2 R-squared of error model

Report generated with FlexDamage v1.0.0