Greater vulnerability but stronger recovery: The double-edged role of industrial clustering in climate risk scenarios

This paper explores the role of industrial clustering in shaping the economic impacts of extreme climate events. Using panel data from 366 cities in China, I find that cities with higher levels of industrial clustering are more vulnerable to immediate economic losses arising from extreme climate events due to their more specialized firms and complex economic structures. However, they exhibit stronger economic recovery capacity in the long term through knowledge spillovers and factor market integration. My findings underscore the dual role of industrial clustering, which serves as both a source of vulnerability and recovery capacity, providing important implications for climate adaptation strategies.