Economics and Business Upcoming Events

MEE Seminar Speaker

Friday April 28, 2023
Engineering Hall 211



Sheila Olmstead is a professor at the Lyndon B. Johnson School of Public Affairs at The University of Texas at Austin (UT), a visiting fellow at Resources for the Future (RFF) in Washington, DC and a senior fellow at the Property and Environment Research Center in Bozeman, Mont. From 2016 to 2017, she served as the senior economist for energy and the environment at the President’s Council of Economic Advisers.

Before joining UT in 2013, Dr. Olmstead was a senior fellow (2013) and fellow (2010–13) at RFF, as well as associate professor (2007–10) and assistant professor (2002–07) of environmental economics at the Yale School of Forestry and Environmental Studies. She is currently an editor of the Journal of the Association of Environmental and Resource Economists. She has also served as vice president and a member of the board of directors of the Association of Environmental and Resource Economists, as associate editor of Water Resources Research, as co-editor of Environmental and Resource Economics, book review editor of Water Economics and Policy, and as editorial council member for the Journal of the Association of Environmental and Resource Economists. Dr. Olmstead holds a Ph.D. in public policy from Harvard University (2002), a master’s in public affairs from The University of Texas at Austin (1996) and a B.A. from the University of Virginia (1992).

Does drought reduce economic activity?

This paper examines the global effects of droughts on economic activity, proxied by remote-sensed nighttime lights data. We use two different, comprehensive indices of drought severity, one remote-sensed and one constructed from ground-sensed meteorological data, contributing to a literature on climate extremes that has previously focused on precipitation, rather than drought. Results suggest that moderate-or-worse droughts in the current year reduce luminosity by about 1 percent, with smaller but statistically significant impacts under even mild and incipient drought conditions. We estimate some lagged effects as well; moderate-or-worse droughts may reduce lights up to four years after they occur. We also test for mediating effects of access to groundwater resources of varying quality and access to reservoirs impounded by dams. We find evidence consistent with both groundwater and dams mitigating droughts’ economic impacts, though some of these results are not fully robust to the choice of drought index.