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The uneven impact of temperature on the macroeconomy: a perspective on total factor productivity

Author

Listed:
  • Lianxiao Yao

    (College of Management and Economics, Tianjin University)

  • Minghui Jin

    (Qingdao Institute of Humanities and Social Sciences, Shandong University)

Abstract

The economic ramifications of climate change have drawn growing attention, yet empirical evidence on how temperature dynamics influence total factor productivity (TFP) in China remains limited. This study constructs a city-level TFP index based on a Cobb–Douglas production function, using balanced panel data from 278 Chinese cities spanning 2000–2022. A fixed effects model is employed to identify the nonlinear impact of temperature on TFP. The results reveal a statistically significant inverted U-shaped relationship, with the marginal effect of temperature on TFP peaking at 13.34 °C. The mechanism analysis indicates that temperature affects TFP through internal factor inputs, by altering the efficiency of labour and capital utilisation efficiency, and external environmental channels such as air pollution, energy consumption, and ecosystem service degradation. The heterogeneity analysis further suggests that urban sensitivity to climate change varies by region, industrial structure, income level, and resource dependence. These findings uncover the mechanisms linking climate variability and economic productivity, and provide empirical support for differentiated climate adaptation policies aimed at sustaining long-term productivity under environmental constraints.

Suggested Citation

  • Lianxiao Yao & Minghui Jin, 2025. "The uneven impact of temperature on the macroeconomy: a perspective on total factor productivity," Economic Change and Restructuring, Springer, vol. 58(4), pages 1-35, August.
    • Handle: RePEc:kap:ecopln:v:58:y:2025:i:4:d:10.1007_s10644-025-09898-9
    DOI: 10.1007/s10644-025-09898-9
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