The non-linear effect of daily weather on economic performance: Evidence from China

This paper thoroughly examines the impacts of daily weather on the aggregate economic outcomes in China and identifies the underlying channels. Using within-county variations in daily weather between 1996 and 2012, we find that daily temperature and precipitation have nonlinear effects on county-level economic outcomes. An additional day with an average temperature above 20 degrees C reduces county-level GDP by 0.05% to 0.08%, and the detrimental effects tend to intensify when the temperature rises. The precipitation does not have robust effects on countylevel GDP. By examining the effects of daily weather on primary, secondary, and tertiary industries, we find that the primary industry is the main channel of the negative impacts of high temperatures. Heavy precipitation is inclined to harm agricultural output, especially grains and oil crop yields. Besides, we discover heterogeneous responses to weather extremes across counties and find suggestive evidence of adaptation.