Extreme heat and rural household adaptation: Evidence from Northeast China

More extreme heat events are expected under climate change, posing threats to food production as well as the lives of agriculture-dependent rural households. Using a detailed panel of rural households in an agricultural region of China, we find extreme heat substantially decreases crop production and lowers households' agricultural returns. Nevertheless, the households successfully smooth their consumption contemporaneously by utilizing precautionarily saved buffers (liquid financial assets and crop stocks), especially among those who regularly hold these buffers. Their future expenditures are also largely unaffected. This adaptability of consumption smoothing discourages within-season adjustments in variable inputs and productive assets. Still, extreme heat guides impacted households toward a more diverse but less risky crop portfolio in later years.