Does Weather Sharpen Income Inequality in Russia?†

• Published date: 01 April 2022
• Author: Vladimir Otrachshenko,Olga Popova
• Date: 01 April 2022
• DOI: http://doi.org/10.1111/roiw.12532

© 2021 The Authors. Review of Income and Wealth published by John Wiley & Sons Ltd on behalf of

International Association for Research in Income and Wealth

DOES WEATHER SHARPEN INCOME INEQUALITY IN RUSSIA?

by Vladimir OtrachshenkO

Center for International Development and Environmental Research (ZEU),

JustusLiebigUniversityGiessen

AND

Olga POPOVa*

Leibniz Institute for East and Southeast European Studies (IOS)

CERGE- EI

Ural Federal University

Global Labor Organization (GLO)

Using subnational panel data, this paper analyzes how hot and cold extreme temperatures and pre-

cipitation affect economic activity and income distribution in Russia. We account for the intensity of

exposure to extreme temperatures by analyzing the impacts of both single and consecutive days with

extreme temperature, i.e., heat waves and cold spells, and examine several labor market channels behind

those effects. We find that consecutive extremely hot days decrease regional GDP per capita but do not

affect income inequality. Poor regions are affected by extreme temperatures relatively more than rich

regions. These effects occur because of reallocation of labor from employment to unemployment, an

increase in prices in poor regions, and to some extent because of changes in the industrial employment

structure, while relative wages are not affected. Extremely cold days, both single and consecutive, as well

as extreme precipitation have a limited impact on economic activity and income distribution.

JEL Codes: I3, J31, Q54

Keywords: interregional inequality, income distribution, heat waves, extreme temperature, Russia

1. intrOductiOn

In a well cited study, Tol et al. (2004) suggest that global warming has a non-

uniform impact on income distribution across the world, i.e., despite emitting fewer

greenhouse gases, poor countries, given their geographic location on the globe and

: The authors are grateful to Hartmut Lehmann, Ilya Voskoboynikov, two anonymous referees,

Olivier Deschenes, Richard Frensch, Vladimir Gimpelson, Stephan Huber, and participants at the joint

conference organized by the International Association for Research in Income and Wealth and National

Research University Higher School of Economics (IARIW- HSE), the 25th Annual Conference of the

European Association of Environmental and Resource Economists (EAERE), and the research seminar at

IOS Regensburg for useful comments and helpful suggestions. Vladimir Otrachshenko acknowledges the

funding by the German Academic Exchange Service (DAAD) from funds of Federal Ministry for

Economic Cooperation (BMZ), SDGnexus Network (Grant No. 57526248), program “exceed—

Hochschulexzellenz in der Entwicklungszusammenarbeit.” Both authors contributed to this study equally.

*Correspondence to: Olga Popova, Leibniz Institute for East and Southeast European Studies

(IOS), Landshuter Str. 4, 93047 Regensburg, Germany (popova@ios-regensburg.de).

Review of Income and Wealth

DOI: 10.1111/roiw.12532

This is an open access article under the terms of the Creative Commons Attribution License, which

permits use, distribution and reproduction in any medium, provided the original work is properly

cited.

Series 68, Number S1, April 2022

S193

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†Notes

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© 2021 The Authors. Review of Income and Wealth published by John Wiley & Sons Ltd on behalf of

International Association for Research in Income and Wealth

lower capacity to adapt, become poorer. Recently, Diffenbaugh and Burke (2019)

examine the global data on gross domestic product (GDP) per capita and confirm

this finding. With few exceptions, however, the subnational analyses of the impact

of extreme temperatures on economic growth and income distribution remain

overlooked (Dell et al., 2009; Hsiang and Deryugina, 2014; Park et al., 2018). This

is unfortunate because estimating the aggregate impacts of global warming on

countries without accounting for regional, industrial, and income group differ-

ences may lead to faulty conclusions (Tol et al., 2004). Also, a cross- country anal-

ysis typically includes diverse countries from all over the world, and it is hard to

analyze channels through which extreme temperatures affect income distribution.

This paper addresses these issues and contributes to the literature on income

distribution and extreme weather events in several ways. First, and most impor-

tantly, using the subnational panel data from Russia, we analyze whether and how

extreme temperature and precipitation shocks affect regional GDP per capita and

income distribution, and examine several labor market channels behind those

effects. Second, unlike other studies, we account for the intensity of extreme tem-

peratures exposure by simultaneously examining the impacts of both single extreme

temperature days and consecutive extreme temperature days (heat waves and cold

spells), i.e., at least three days with the same extreme temperature.1 Given that the

frequency and intensity of extreme weather events will increase in the future,

accounting for heat waves and cold spells is an important policy- relevant task for

gaining a more precise estimation of global warming consequences

(Intergovernmental Panel on Climate Change [IPCC], 2014).

Studies that use the regional- level panel data to identify the effects of hot and

cold temperatures generally focus on mortality. To date, such studies exist for

China, India, Mexico, Russia, and the USA (Deschênes and Moretti, 2009;

Deschênes and Greenstone, 2011; Burgess et al., 2017; Otrachshenko et al., 2017;

Otrachshenko et al., 2018; Yu et al., 2019; Banerjee and Maharaj, 2020; Cohen and

Dechezleprêtre, 2021; Otrachshenko et al., 2021).2 The mechanism behind the

temperature- mortality relationship is related to the physiological response of the

human body to heat or cold stress through thermoregulation. The findings gener-

ally suggest that hot temperatures increase mortality, and the magnitude of this

impact may depend on the level of the country’s economic development, since peo-

ple in developed countries have more income to cope with the consequences of

weather.

Earlier studies also find that hot temperatures reduce labor productivity,

encourage the reallocation of time between indoor and outdoor work and leisure,

and induce companies in industries with greater exposure to temperature risks to

move to industries with a lower exposure (Dell et al., 2009; Graff Zivin and Neidell,

2014; Park et al., 2018; Zhang et al., 2018; Otrachshenko and Nunes, 2021). This

suggests that weather indicators may also affect the income distribution either

1We define an extremely hot day as one day with a mean temperature above 25°C and an extremely

cold day as one day with a mean temperature below −23°C. Consecutive extremely hot/cold days are a

sequence of at least three such days. These definitions are discussed in the data section.

2In a recent study, Hartwell et al. (2021b) also control for weather conditions in studying the causes

of city- level pollution in Russia.

Review of Income and Wealth, Series 68, Number S1, April 2022

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