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Assessment of the effects of extreme temperature on economic activity

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  • Chen, Fanglin
  • Zhang, Jie
  • Chen, Zhongfei

Abstract

The effects of climate change on the economy are becoming increasingly evident. Based on information of all newly registered enterprises in China from 2000 to 2019, we discuss the relationship between heatwave and entrepreneurial activities at county level. Results indicate that extremely high temperatures can negatively affect entrepreneurial activities. Moreover, after considering endogeneity issues and conducting a series of robustness checks, the conclusion remains. In addition, mechanism testing shows that extremely high temperatures reduce the attractiveness of entrepreneurship by generating fiscal pressure effects, industrial dependence effects, and leading demonstration effects. Finally, heterogeneity analysis indicates that the adverse effects of extremely high temperatures will be alleviated in areas with large populations and high levels of education and healthcare. Different from the relief effect brought by the vigorous development of the secondary and tertiary industries, regions that rely more on the primary industry suffer more severe damage.

Suggested Citation

  • Chen, Fanglin & Zhang, Jie & Chen, Zhongfei, 2024. "Assessment of the effects of extreme temperature on economic activity," Ecological Economics, Elsevier, vol. 222(C).
    • Handle: RePEc:eee:ecolec:v:222:y:2024:i:c:s0921800924001228
    DOI: 10.1016/j.ecolecon.2024.108225
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    Cited by:

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    More about this item

    Keywords

    Extremely high temperature; Entrepreneurial activity; Climate change; Enterprise registration;
    All these keywords.

    JEL classification:

    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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