Does climate risk suppress rural household consumption? empirical evidence from rural China

Increasing climate risks may influence the behavioral decisions of microeconomic entities, including household consumption choices. Based on the data of the China Household Finance Survey in 2019, this study empirically examines the impact of climate risk on rural households' consumption demand and its underlying mechanism. The findings reveal that an increase in climate risk exerts a significant negative impact on rural household consumption, primarily through intensified precautionary savings motives and increased out-of-pocket medical expenditures. Heterogeneity tests reveal that the impact of climate risk on consumption is greater for low-income households compared to their higher-income counterparts. Furthermore, the negative effect of climate risk on consumption is more pronounced for families without supplementary critical illness insurance. This research extends existing studies on climate risks' impacts on microeconomic agents, offering practical insights for revitalizing rural consumption markets under worsening climatic conditions.