Climate change and inequality: distributional effects of heatwaves and heat stress in India

Abstract The study investigates the effect of extreme heat on consumption inequality in India from 2014 to 2022. To capture local geographical and climatic diversity, the study examines the effect at the district level. We calculated a range of indices to measure extreme heat, including heatwaves, hot days and heat stress. We provided empirical evidence on the effect of extreme heat on inequality using two-way fixed-effects and generalised method of moments, and causal evidence using double machine learning. Results reveal that extreme heat increases inequality. Districts with high-temperature anomalies adapt to extreme heat, whereas those with low-temperature anomalies experience greater adverse effects. The study explores the agricultural channel and finds that districts with high agricultural intensity exhibit greater adaptation to extreme heat, whereas low-agricultural-intensity districts experience increased inequality due to extreme heat. Classifying districts by temperature anomalies and agricultural intensity is crucial for policies aimed at mitigating the impacts of extreme heat.