Could Weather Fluctuations Affect Local Economic Growth? Evidence from Chinese Counties

Asian Development Review

Chengzheng Li, Jiajia Cong, Haiying Gu

Abstract:

This paper uses historical fluctuations of temperature and precipitation within Chinese counties to identify their effects on the growth of economic outcome during 1996 and 2012. We find three primary results. First, higher temperature significantly reduces the growth rate of county-level income per capita: increasing temperature by 1◦C would lower the growth rate by 1.52 percentage points. Second, weather fluctuations not only affect the level of output, but also affect its growth rate. Third, weather fluctuations have wide-ranging effects. Beyond substantial effects on agricultural output, they also affect non-agricultural sectors, labor productivity and investment. Our findings provide new evidence for the impact of weather changes on economic development and have great implications for adaptation policies.

Keywords: Weather shocks; Economic growth; Temperature; Precipitation; Climate change

JEL classification: O13; O44; Q54; Q56