Will Climate Change Increase Inequality in Wage Growth? -Evidence from China's 30 Provincial Capitals

Abstract

Examining the impact of long-term temperature rise on wages is not only beneficial for gaining insight into the economic consequences of climate change, but also of great reference value to reduce income disparity and alleviate relative poverty. Based on the panel data of 30 provincial capitals from 1996-2018, the Wet Bulb Globe Temperature (WBGT) is adopted in this paper to conduct an empirical analysis of temperature rises’ impact on wage in various industries. It is found that, firstly, temperature rise will significantly reduce the growth of wage and show heterogeneity. Among them, the growth of wage in the manufacturing industry is most prominently affected by rising annual average temperatures. Second, in terms of seasonal differences, the negative impact of temperature rise on wage growth is mainly in summer. Different temperature swings and different vulnerability producers demonstrate lead to largely dissimilar marginal impacts of temperature rise in different regions. Wages in relatively vulnerable regions and regions with relatively sharp temperature fluctuations are more significantly affected by the increase in average summer temperatures. Thirdly, in the long run, the negative impact of annual average temperature increases on the wages of agriculture industries shows a notable cumulative effect, which mainly comes from the irreversible impact of temperature increase on labor productivity, and will further widen the income gap between regions. Based on the above findings, this paper proposes targeted strategies from two dimensions, “mitigation” and “adaptation”, in order to narrow the regional income gap and achieve balanced development, and to provide theoretical references for subsequent policies responding to climate change.