Extreme Temperatures, Adaptation Capacity, and Household Retail Consumption

Abstract

While the large cost of extreme temperatures on production is well documented, relatively little is known about its impact on consumption, a prevailing measure of welfare. Using high-frequency micro shopping data from U.S. households, we report three findings. First, deviating from mild temperatures negatively affects the number of store visits, but the impact on the contemporaneous consumption quantity is moderated by stockpiling behavior, especially for extreme cold. Second, households actively manage inventory over time, which nullifies the cumulative impact of extreme cold, while they permanently reduce consumption levels on extremely hot days. Third, passenger cars substantially moderate the negative impact of extreme temperatures on retail consumption—as large as 49% in comparison to the baseline of zero vehicles—while rideshare services or public transit do not produce a similar moderating effect.