The Impact of Weather on Economic Growth: County-Level Evidence from China

Abstract

While the impact of long-term climate change on economic systems has received substantial attention, the influence of short-term weather variations on economic growth has been comparatively neglected. This study utilizes county-level panel data from 2001 to 2020 to investigate the impact of weather on regional economic growth in China. The findings indicate that average temperature significantly reduces economic growth, whereas average precipitation does not have a significant overall effect. Notably, the adverse impact of temperature on economic growth is nonlinear and is exacerbated at higher temperatures, particularly in wealthier counties. The channel analysis shows that weather influences regional economic growth by affecting sectoral economies, factor inputs and economic productivity. While the primary industry’s overall growth rate remains unaffected by weather, sub-sectors such as grain production and animal husbandry are impacted. The secondary industry, especially large-scale industrial enterprises, is adversely affected by both temperature and precipitation. Conversely, higher average temperatures positively correlate with growth in the tertiary sector, promoting retail sales of consumer goods. The study also finds limited evidence for weather’s impact on investment growth, primarily in real estate development, and no significant effect on labor input growth. Additionally, weather conditions, particularly temperature, negatively affect total factor productivity, labor productivity and capital productivity, with precipitation adversely impacting capital productivity alone. These findings underscore the importance of tailored strategies to mitigate the negative effects of adverse weather conditions on sustaining sustainable regional economic growth.