Impact of extreme weather events on manufacturing productivity: Evidence from typhoon shocks in China

Abstract

Business stability and development may face escalating threats due to extreme weather events, particularly in developing countries with large manufacturing sectors. Focusing on enterprises' vulnerabilities and adaptive capacity, we investigate how typhoon disasters affect manufacturing firms' productivity in China. Using panel data from Chinese listed companies from 2007 to 2022, in conjunction with a meteorological wind field model to quantify localized typhoon damage intensity, we empirically examine its impact on firm productivity. Our findings reveal a 2 % fall in firm productivity per standard deviation increase in typhoon disaster severity. Empirical results confirm three main transmission mechanisms: asset loss, increased financial constraints, and elevated supply chain disruption risk. The negative impacts are unevenly distributed, with enterprises having larger assets, those in nonhigh-tech sectors, and those operating in less competitive markets exhibiting higher susceptibility to typhoon shocks. By focusing on the microlevel mechanisms through which extreme weather events affect firm productivity, this study provides new insights into how recurring natural disasters disrupt enterprise operations. Our findings contribute to the growing body of literature on extreme weather impacts in emerging markets and have relevant policy implications for strengthening firms' climate resilience and ensuring production continuity.