The temperature effect on perceived income

Abstract

Extensive research has focused on the impact of weather on working capacity and income. However, in regions where income data largely relies on surveys, a pivotal yet underexplored question is whether weather not only influence real income but also introduce biases into survey-collected income data. We analyze longitudinal data from the China Health and Nutrition Survey and corresponding weather records from the Global Surface Summary of the Day, and uncover a negative correlation between survey-day temperature and self-reported annual income from the previous year. With a series of robustness checks, we confirm that the effect is primarily driven by behavioral factors rather than actual income changes. And threshold regression analyses show that the impact of temperature is more pronounced on hot days and relatively subdued or even reversed on cooler days. Further analyses indicate that mood, rather than cognitive capacity, plays a central role in causing the observed downward bias.