The Impact of Extreme Weather Events on Income Inequality: Global Evidence

As global climate change intensifies, the frequency and intensity of extreme weather events continue to increase, and their impact on economic and social operations is gradually becoming more significant. The growing income inequality is an important challenge faced by countries worldwide, so the impact of extreme weather events on it is worth further study. Based on the cross-national panel data from 1990 to 2022 across 104 countries, this paper tests the impact and mechanism of extreme weather events on income inequality. The study finds that extreme weather events significantly increase income inequality, which remains the same under a series of robustness tests. Consistent with theoretical analysis, the mechanism test indicates that extreme weather events expand income inequality by reducing macroeconomic stability, hindering the market-oriented development of financial structures, and inhibiting the rationalization level of industrial structure. Further heterogeneity tests reveal that the effect of extreme weather events on income inequality is more pronounced in countries characterized by poorer economic development levels, lower insurance coverage, weaker government effectiveness, and non-OECD membership status. It is also found that extreme temperature has the most prominent impact among the four types of extreme weather events. This study provides valuable insights for understanding the impact of extreme weather events on income inequality, as well as practical guidance for mitigating the effects of climate change.