Shocking concerns: public perception about climate change and the macroeconomy

Abstract

Public perceptions of climate change arguably contribute to shaping private adaptation and support for policy intervention. In this paper, we propose a novel Climate Concern Index (CCI), based on disaggregated web-search volumes related to climate change topics, to gauge the intensity and dynamic evolution of collective climate perceptions, and evaluate its impacts on the business cycle. Using data from the United States over the 2004:2024 span, we capture widespread shifts in perceived climate-related risks, particularly those consistent with the postcognitive interpretation of affective responses to extreme climate events. To assess the aggregate implications of evolving public concerns about the climate, we estimate a proxy-SVAR model and find that exogenous variation in the CCI entails a statistically significant drop in both employment and private consumption and a persistent surge in stock market volatility, while core inflation remains largely unaffected. These results suggest that, even in the absence of direct physical risks, heightened concerns for climate-related phenomena can trigger behavioral adaptation with nontrivial consequences for the macroeconomy, thereby demanding attention from institutional players in the macro-financial field.