Shocks from Extreme Temperatures: Climate Sensitivity of Urban Digital Economy in China

This study systematically examines the impacts of extreme temperatures on the digital economy development index and the underlying mechanisms based on panel data from 281 prefecture-level cities in China from 2012 to 2023. This study explicitly distinguishes the distinctive adaptive capacity of the digital economy in responding to climate risks. Through global and local spatial autocorrelation analysis, the study finds that both extreme temperatures and the digital economy exhibit significant spatial clustering. This study employs the spatial Durbin model (SDM) and effect decomposition and further incorporates the GS2SLS estimator alongside dual instrumental variables constructed from historical geographic characteristics to address endogeneity, thereby identifying the asymmetrical impacts of extreme heat and extreme cold on the digital economy with great rigor. Specifically, extreme heat fosters short-term local digital demand that is subsequently translated into long-term growth in IT human capital and infrastructure, thereby increasing the DEDI. However, its net spatial effect is inhibitory due to energy crowding out. Extreme cold, by contrast, primarily disrupts supply chains and intensifies energy consumption, with its impact largely confined to the local scope. Green technological innovation mitigates the impact of extreme heat on the digital economy through demand substitution, while, under extreme cold, it manifests as the physical protection of infrastructure. Meanwhile, an optimized industrial structure substantially reduces the economy’s dependence on supply chains, amplifying the promotional effect of extreme temperatures on the digital economy and reflecting the transformation capacity of regions under complex environmental conditions. Heterogeneity analysis demonstrates that the effects of extreme temperatures vary significantly across different urban agglomerations, economic zones, geographic regions and city types. This study not only extends the theoretical framework for the economic assessment of climate risks and spatial econometric analysis to the climate sensitivity of the digital economy but also provides empirical evidence for understanding the complex relationship between climate change and digital economy development and offers references for differentiated policies in a coordinated regional digital economy.