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Extreme heat and household consumption: Evidence from China

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  • Guo, Mengmeng
  • Yu, Yixiang

Abstract

This paper investigates the impact of extreme heat on household consumption using data from the 2013–2019 China Household Finance Survey. We find that extreme heat significantly suppresses total consumption, where each additional day of extreme high temperature leads to a 0.20% decline in total expenditures. This effect is more pronounced among rural, high-dependency-ratio, and credit-constrained households. Mechanism analyses reveal that extreme heat operates through two distinct channels: an income channel, whereby agricultural and labor earnings are reduced, and a risk channel, characterized by heightened risk aversion and increased precautionary savings. Crucially, we document a systematic budget reallocation within the household consumption basket. While subsistence spending remains rigid, defensive expenditures on healthcare and communication significantly increase, forcing households to sharply curtail discretionary and hedonic spending on entertainment, durables, tourism, and luxuries. These findings highlight how climate shocks degrade quality of life by shifting resources from welfare-enhancing to survival-oriented necessities.

Suggested Citation

  • Guo, Mengmeng & Yu, Yixiang, 2026. "Extreme heat and household consumption: Evidence from China," China Economic Review, Elsevier, vol. 99(C).
    • Handle: RePEc:eee:chieco:v:99:y:2026:i:c:s1043951x26000969
    DOI: 10.1016/j.chieco.2026.102746
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