IDEAS home Printed from https://ideas.repec.org/a/eee/jcecon/v53y2025i2p389-411.html
   My bibliography  Save this article

The impact of rainfall on productivity: Implications for Chinese manufacturing

Author

Listed:
  • Chen, Xiaodong
  • Lin, Yatang
  • Zhu, Pengyu

Abstract

Rainfall affects productivity in many ways. Compared to temperature anomalies, the impacts of precipitation anomalies have been understudied, with existing evidence at the macro level. By combining ground station-level climate data and micro-data from half a million manufacturing firms in China, we uncover that rainfall negatively impacts firms’ productivity, with the most significant negative impacts concentrated in extremely heavy rainfall anomalies. Labor-intensive, low-tech, or less productive firms and those located in rainy regions are vulnerable to rainfall extremes. Our estimates are large enough to explain previously observed output losses in cross-country panels. We uncover three primary channels through which manufacturing firms experience productivity loss: reduction in labor, agriculture intermediate inputs and transportation disruptions. We also identify several margins of adaptation. Utilizing the Shared Socioeconomic Pathways Scenarios (SSPs), we estimate the future impact of rainfall on productivity in a cost-benefit analysis. Our projections indicate a substantial output loss of 2.4–14.9 billion CNY by 2100, due to the increase in extreme rainfall events under each scenario with different implementation of environmental policies.

Suggested Citation

  • Chen, Xiaodong & Lin, Yatang & Zhu, Pengyu, 2025. "The impact of rainfall on productivity: Implications for Chinese manufacturing," Journal of Comparative Economics, Elsevier, vol. 53(2), pages 389-411.
    • Handle: RePEc:eee:jcecon:v:53:y:2025:i:2:p:389-411
    DOI: 10.1016/j.jce.2025.03.005
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0147596725000241
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jce.2025.03.005?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Seung-Ki Min & Xuebin Zhang & Francis W. Zwiers & Gabriele C. Hegerl, 2011. "Human contribution to more-intense precipitation extremes," Nature, Nature, vol. 470(7334), pages 378-381, February.
    2. Cui, Xiaomeng & Zhong, Zheng, 2024. "Climate change, cropland adjustments, and food security: Evidence from China," Journal of Development Economics, Elsevier, vol. 167(C).
    3. Zhang, Peng & Deschenes, Olivier & Meng, Kyle & Zhang, Junjie, 2018. "Temperature effects on productivity and factor reallocation: Evidence from a half million chinese manufacturing plants," Journal of Environmental Economics and Management, Elsevier, vol. 88(C), pages 1-17.
    4. Wu, Mingqin & Yu, Linhui & Zhang, Junsen, 2023. "Road expansion, allocative efficiency, and pro-competitive effect of transport infrastructure: Evidence from China," Journal of Development Economics, Elsevier, vol. 162(C).
    5. Acemoglu, Daron & Cao, Dan, 2015. "Innovation by entrants and incumbents," Journal of Economic Theory, Elsevier, vol. 157(C), pages 255-294.
    6. Newell, Richard G. & Prest, Brian C. & Sexton, Steven E., 2021. "The GDP-Temperature relationship: Implications for climate change damages," Journal of Environmental Economics and Management, Elsevier, vol. 108(C).
    7. Xiaomeng Cui, 2020. "Beyond Yield Response: Weather Shocks and Crop Abandonment," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 7(5), pages 901-932.
    8. Chen, Xiaoguang & Yang, Lu, 2019. "Temperature and industrial output: Firm-level evidence from China," Journal of Environmental Economics and Management, Elsevier, vol. 95(C), pages 257-274.
    9. Chen, Shuai & Chen, Xiaoguang & Xu, Jintao, 2016. "Impacts of climate change on agriculture: Evidence from China," Journal of Environmental Economics and Management, Elsevier, vol. 76(C), pages 105-124.
    10. E. Somanathan & Rohini Somanathan & Anant Sudarshan & Meenu Tewari, 2021. "The Impact of Temperature on Productivity and Labor Supply: Evidence from Indian Manufacturing," Journal of Political Economy, University of Chicago Press, vol. 129(6), pages 1797-1827.
    11. Jose Asturias & Sewon Hur & Timothy J. Kehoe & Kim J. Ruhl, 2023. "Firm Entry and Exit and Aggregate Growth," American Economic Journal: Macroeconomics, American Economic Association, vol. 15(1), pages 48-105, January.
    12. Wenju Cai & Agus Santoso & Guojian Wang & Evan Weller & Lixin Wu & Karumuri Ashok & Yukio Masumoto & Toshio Yamagata, 2014. "Increased frequency of extreme Indian Ocean Dipole events due to greenhouse warming," Nature, Nature, vol. 510(7504), pages 254-258, June.
    13. Desbureaux, Sébastien & Rodella, Aude-Sophie, 2019. "Drought in the city: The economic impact of water scarcity in Latin American metropolitan areas," World Development, Elsevier, vol. 114(C), pages 13-27.
    14. Cascarano, Michele & Natoli, Filippo & Petrella, Andrea, 2025. "Entry, exit, and market structure in a changing climate," European Economic Review, Elsevier, vol. 176(C).
    15. Wenju Cai & Simon Borlace & Matthieu Lengaigne & Peter van Rensch & Mat Collins & Gabriel Vecchi & Axel Timmermann & Agus Santoso & Michael J. McPhaden & Lixin Wu & Matthew H. England & Guojian Wang &, 2014. "Increasing frequency of extreme El Niño events due to greenhouse warming," Nature Climate Change, Nature, vol. 4(2), pages 111-116, February.
    16. Olivier Deschênes & Michael Greenstone, 2007. "The Economic Impacts of Climate Change: Evidence from Agricultural Output and Random Fluctuations in Weather," American Economic Review, American Economic Association, vol. 97(1), pages 354-385, March.
    17. Xiaomeng Cui & Wei Xie, 2022. "Adapting Agriculture to Climate Change through Growing Season Adjustments: Evidence from Corn in China," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(1), pages 249-272, January.
    18. Nuno Limão & Anthony J. Venables, 2001. "Infrastructure, Geographical Disadvantage, Transport Costs, and Trade," The World Bank Economic Review, World Bank, vol. 15(3), pages 451-45-479.
    19. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    20. Markus G. Donat & Andrew L. Lowry & Lisa V. Alexander & Paul A. O’Gorman & Nicola Maher, 2016. "More extreme precipitation in the world’s dry and wet regions," Nature Climate Change, Nature, vol. 6(5), pages 508-513, May.
    21. Damania, R. & Desbureaux, S. & Zaveri, E., 2020. "Does rainfall matter for economic growth? Evidence from global sub-national data (1990–2014)," Journal of Environmental Economics and Management, Elsevier, vol. 102(C).
    22. Meng, Lingsheng, 2013. "Evaluating China's poverty alleviation program: A regression discontinuity approach," Journal of Public Economics, Elsevier, vol. 101(C), pages 1-11.
    23. Brandt, Loren & Van Biesebroeck, Johannes & Zhang, Yifan, 2012. "Creative accounting or creative destruction? Firm-level productivity growth in Chinese manufacturing," Journal of Development Economics, Elsevier, vol. 97(2), pages 339-351.
    24. Anouliès, Lisa, 2017. "Heterogeneous firms and the environment: a cap-and-trade program," Journal of Environmental Economics and Management, Elsevier, vol. 84(C), pages 84-101.
    25. Gavin D. Madakumbura & Chad W. Thackeray & Jesse Norris & Naomi Goldenson & Alex Hall, 2021. "Anthropogenic influence on extreme precipitation over global land areas seen in multiple observational datasets," Nature Communications, Nature, vol. 12(1), pages 1-9, December.
    26. Kalkuhl, Matthias & Wenz, Leonie, 2020. "The impact of climate conditions on economic production. Evidence from a global panel of regions," Journal of Environmental Economics and Management, Elsevier, vol. 103(C).
    27. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2012. "Temperature Shocks and Economic Growth: Evidence from the Last Half Century," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(3), pages 66-95, July.
    28. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(2), pages 317-341.
    29. Hongbin Cai & Qiao Liu, 2009. "Competition and Corporate Tax Avoidance: Evidence from Chinese Industrial Firms," Economic Journal, Royal Economic Society, vol. 119(537), pages 764-795, April.
    30. Goutam Konapala & Ashok K. Mishra & Yoshihide Wada & Michael E. Mann, 2020. "Climate change will affect global water availability through compounding changes in seasonal precipitation and evaporation," Nature Communications, Nature, vol. 11(1), pages 1-10, December.
    31. Miaojie Yu, 2015. "Processing Trade, Tariff Reductions and Firm Productivity: Evidence from Chinese Firms," Economic Journal, Royal Economic Society, vol. 125(585), pages 943-988, June.
    32. Salvador Barrios & Luisito Bertinelli & Eric Strobl, 2010. "Trends in Rainfall and Economic Growth in Africa: A Neglected Cause of the African Growth Tragedy," The Review of Economics and Statistics, MIT Press, vol. 92(2), pages 350-366, May.
    33. Daron Acemoglu & Simon Johnson & James A. Robinson, 2002. "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(4), pages 1231-1294.
    34. Ramelli, Stefano & Ossola, Elisa & Rancan, Michela, 2021. "Stock price effects of climate activism: Evidence from the first Global Climate Strike," Journal of Corporate Finance, Elsevier, vol. 69(C).
    35. Maximilian Kotz & Anders Levermann & Leonie Wenz, 2022. "The effect of rainfall changes on economic production," Nature, Nature, vol. 601(7892), pages 223-227, January.
    36. Cao, Kang Hua & Birchenall, Javier A., 2013. "Agricultural productivity, structural change, and economic growth in post-reform China," Journal of Development Economics, Elsevier, vol. 104(C), pages 165-180.
    37. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
    38. Kloek, T, 1981. "OLS Estimation in a Model Where a Microvariable Is Explained by Aggregates and Contemporaneous Disturbances Are Equicorrelated," Econometrica, Econometric Society, vol. 49(1), pages 205-207, January.
    39. E. E. Koks & J. Rozenberg & C. Zorn & M. Tariverdi & M. Vousdoukas & S. A. Fraser & J. W. Hall & S. Hallegatte, 2019. "A global multi-hazard risk analysis of road and railway infrastructure assets," Nature Communications, Nature, vol. 10(1), pages 1-11, December.
    40. Xue, Shuyu & Zhang, Bohui & Zhao, Xiaofeng, 2021. "Brain drain: The impact of air pollution on firm performance," Journal of Environmental Economics and Management, Elsevier, vol. 110(C).
    41. Sungbin Cho & Peter Gordon & James E. Moore II & Harry W. Richardson & Masanobu Shinozuka & Stephanie Chang, 2001. "Integrating Transportation Network and Regional Economic Models to Estimate the Costs of a Large Urban Earthquake," Journal of Regional Science, Wiley Blackwell, vol. 41(1), pages 39-65, February.
    42. Shihe Fu & V Brian Viard & Peng Zhang, 2021. "Air Pollution and Manufacturing Firm Productivity: Nationwide Estimates for China [Management and shocks to worker productivity]," The Economic Journal, Royal Economic Society, vol. 131(640), pages 3241-3273.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wu, Zhiyang & Zhou, Tao & Zhang, Ning & Choi, Yongrok & Kong, Fanbin, 2023. "A hidden risk in climate change: The effect of daily rainfall shocks on industrial activities," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 161-180.
    2. Tarsia, Romano, 2024. "Heterogeneous effects of weather shocks on firm economic performance," LSE Research Online Documents on Economics 124251, London School of Economics and Political Science, LSE Library.
    3. Xiaojun Yu & Russell Smyth & Yao Yao & Quanda Zhang, 2024. "Water stress and industrial firm productivity: Evidence from China," Monash Economics Working Papers 2024-20, Monash University, Department of Economics.
    4. Xiaoguang Chen & Madhu Khanna & Lu Yang, 2022. "The impacts of temperature on Chinese food processing firms," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 66(2), pages 256-279, April.
    5. Nikhil Kaushik & Ashish Sharma & Poornima Mishra & Sunil Kumar, 2024. "Temperature Rising, Growth Descending: Climate Change Impacts on Asian Economies," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 16(3), pages 295-320, September.
    6. Li, Chengzheng & Cong, Jiajia & Yin, Lijuan, 2021. "Extreme heat and exports: Evidence from Chinese exporters," China Economic Review, Elsevier, vol. 66(C).
    7. Huang, Yi & Li, Yanjun, 2023. "Labor activism over searing heat," Journal of Environmental Economics and Management, Elsevier, vol. 122(C).
    8. Gong, Jiaowei & Shi, Xiangyu & Wang, Chang & Zhang, Xin, 2025. "Extreme high temperatures and adaptation by social dynamics: Theory and evidence from China," Journal of Economic Behavior & Organization, Elsevier, vol. 234(C).
    9. Zhang, Peng & Deschenes, Olivier & Meng, Kyle & Zhang, Junjie, 2018. "Temperature effects on productivity and factor reallocation: Evidence from a half million chinese manufacturing plants," Journal of Environmental Economics and Management, Elsevier, vol. 88(C), pages 1-17.
    10. Chen, Ying & Wu, Wenjie & Yun, Yanwen, 2025. "The geography of pollution regulation and productivity," Journal of Environmental Economics and Management, Elsevier, vol. 131(C).
    11. Fu, Shihe & Viard, V. Brian & Zhang, Peng, 2022. "Trans-boundary air pollution spillovers: Physical transport and economic costs by distance," Journal of Development Economics, Elsevier, vol. 155(C).
    12. Guojin Chen & Wenpeng Chen & Jiaqi Wang & Xiangqin Zhao, 2023. "High‐temperature exposure risk, corporate performance and pricing efficiency of the stock market," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(3), pages 3553-3583, September.
    13. Hai‐Anh H. Dang & Stephane Hallegatte & Trong‐Anh Trinh, 2024. "Does global warming worsen poverty and inequality? An updated review," Journal of Economic Surveys, Wiley Blackwell, vol. 38(5), pages 1873-1905, December.
    14. Li Chen & Bin Jiang & Chuan Wang, 2023. "Climate change and urban total factor productivity: evidence from capital cities and municipalities in China," Empirical Economics, Springer, vol. 65(1), pages 401-441, July.
    15. Lyu, Zhuoyang & Yu, Li & Liu, Chen & Ma, Tiemeng, 2024. "When temperatures matter: Extreme heat and labor share," Energy Economics, Elsevier, vol. 138(C).
    16. Li, Chengzheng & Cong, Jiajia & Gu, Haiying & Zhang, Peng, 2021. "The non-linear effect of daily weather on economic performance: Evidence from China," China Economic Review, Elsevier, vol. 69(C).
    17. repec:ags:aaea22:335522 is not listed on IDEAS
    18. Tol, Richard S. J., "undated". "The Economic Impact of Weather and Climate," FEEM Working Papers 309917, Fondazione Eni Enrico Mattei (FEEM).
    19. Gilli, Martino & Calcaterra, Matteo & Emmerling, Johannes & Granella, Francesco, 2024. "Climate change impacts on the within-country income distributions," Journal of Environmental Economics and Management, Elsevier, vol. 127(C).
    20. Michael T. Kiley, 2024. "Growth at risk from climate change," Economic Inquiry, Western Economic Association International, vol. 62(3), pages 1134-1151, July.
    21. Chen, Xiaoguang & Cui, Xiaomeng & Gao, Jing, 2023. "Differentiated agricultural sensitivity and adaptability to rising temperatures across regions and sectors in China," Journal of Environmental Economics and Management, Elsevier, vol. 119(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jcecon:v:53:y:2025:i:2:p:389-411. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622864 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.