Abnormal Temperature and Urban-Rural Income Disparity in China

Abstract This paper investigates whether and how local abnormal temperature affects urban-rural income disparity. Empirical evidence suggests that rising abnormal temperatures widen the urban-rural income disparity, a finding that remains essentially unchanged across several robustness checks. A closer look at economic mechanisms reveals that abnormal temperature impacts urban-rural income disparity mainly by increasing physical risks to the output of the primary sector and fostering credit discrimination in rural areas. Moreover, we highlight that the effect of abnormal temperature is not uniform across the cross-section, especially noticeable in prefectures with lower urban-rural integration and poorer agricultural technology but with a high share of rural population. Overall, our research confirms the notion that abnormal temperature has an essential implication in shaping urban-rural income disparity in China.