This paper provides new evidence on the relationship between temperature and income.
Using sub-national data from 12 countries in the Americas, we show that the negative cross-
sectional relationship between temperature and income exists within countries, as well as across
countries. We then provide a theoretical framework for reconciling the substantial, negative
association between temperature and income in cross-section with the even stronger short-run
effects of temperature shown in panel models. The theoretical framework suggests that half of
the negative short-term effects of temperature are offset in the long run through adaptation.