Temperature Effects on Productivity and Factor Reallocation: Evidence from a Half Million Chinese Manufacturing Plants

46 Pages Posted: 6 Nov 2017

See all articles by Peng Zhang

Peng Zhang

Hong Kong Polytechnic University - School of Accounting and Finance

Olivier Deschenes

University of California, Santa Barbara - College of Letters & Science - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Kyle Meng

University of California, Santa Barbara (UCSB) - Donald Bren School of Environmental Science & Management

Junjie Zhang

Duke Kunshan University

Multiple version iconThere are 2 versions of this paper

Date Written: November 2017

Abstract

This paper uses detailed production data from a half million Chinese manufacturing plants over 1998-2007 to estimate the effects of temperature on firm-level total factor productivity (TFP), factor inputs, and output. We detect an inverted U-shaped relationship between temperature and TFP and show that it primarily drives the temperature-output effect. Both labor- and capital- intensive firms exhibit sensitivity to high temperatures. By mid 21st century, if no additional adaptation were to occur, we project that climate change will reduce Chinese manufacturing output annually by 12%, equivalent to a loss of $39.5 billion in 2007 dollars. This implies substantial local and global economic consequences as the Chinese manufacturing sector produces 32% of national GDP and supplies 12% of global exports.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Suggested Citation

Zhang, Peng and Deschenes, Olivier and Meng, Kyle and Zhang, Junjie, Temperature Effects on Productivity and Factor Reallocation: Evidence from a Half Million Chinese Manufacturing Plants (November 2017). NBER Working Paper No. w23991. Available at SSRN: https://ssrn.com/abstract=3065803

Peng Zhang (Contact Author)

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

Hung Hom
Kowloon
Hong Kong

HOME PAGE: http://pengzhang.weebly.com

Olivier Deschenes

University of California, Santa Barbara - College of Letters & Science - Department of Economics ( email )

UC Santa Barbara
Santa Barbara, CA 93106
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Kyle Meng

University of California, Santa Barbara (UCSB) - Donald Bren School of Environmental Science & Management ( email )

4670 Physical Sciences North
Santa Barbara, CA 93106-5131
United States

Junjie Zhang

Duke Kunshan University ( email )

No. 8 Duke Avenue
Kunshan, 215316
China
+86 512 36657068 (Phone)

HOME PAGE: http://junjiezhang.org

Register to save articles to
your library

Register

Paper statistics

Downloads
5
Abstract Views
122
PlumX Metrics