Will temperature affect the export quality of firms? Evidence from China

Abstract

Purpose: This study aims to investigate whether temperature affects the product quality of exporters and whether the effect is non-linear. More specifically, whether the impact of high temperatures differs from the impact of low temperatures, and whether different types of companies or industries are affected differently. Design/methodology/approach: The paper uses detailed data covering all Chinese exporters from 2000 to 2016 to estimate the effects of temperature on the product quality of export firms. To clarify the relationship between them, the authors use a semi-parametric regression method, trying to test whether there is a non-linear relationship between temperature and the export quality of firms. Findings: The increase in the number of high temperature days significantly reduces the quality of exported products, and this negative effect increases as the temperature rises. High temperature has the most significant negative impact on export quality for firms with low technical complexity, private firms and firms with no intermediate imports and located in historical hot cities. Product quality of both labor-intensive and capital-intensive firms will be affected by heat. High temperatures have the greatest negative impact on the export quality of newly entering products, followed by exiting products, with the least negative impact on persisting product. Originality/value: To the best of the authors’ knowledge, this paper is the first to examine the impact of temperature on the quality of economic development. The findings of this paper again show that the potential economic impacts of global warming are huge. In addition to some potentially devastating impacts in the future, global warming is already causing imperceptible impacts in the present. Public and economic agents need to fully understand the possible adverse impacts of climate change and take corresponding adaptation measures to cope with global warming.