The Impact of Weather on Local Government Spending 
This paper fills a gap in the climate-economy literature by examining how weather affects local government spending. It uses a panel data model to analyze data from Massachusetts municipalities during a 30-year span from fiscal years 1990 through 2019 to estimate the relationship between government expenditures and a series of weather variables including average temperature, total precipitation, and measures of extreme temperature and precipitation.
Key Findings
- A 1 degree Fahrenheit rise in the average temperature, on average, results in a 3.2 percent increase in real per capita total general-fund expenditures.
- A 1 percentage point increase in the percentage of days with a maximum temperature of 32 degrees Fahrenheit or colder or in the percentage of days with at least 1 inch of snowfall, on average, leads to a 0.4 percent increase in real per capita total general-fund expenditure.
- Government spending may be affected by not only contemporaneous weather conditions but also weather conditions in the preceding two years.
- Spending on public works, general government, and human services are affected more than other spending categories.
- Coastal communities and densely populated cities experience a greater impact of heavy precipitation on government spending.
- There is evidence indicating that municipal governments have adapted and become less sensitive to temperature over time; however, there is no strong indication that they have adapted to precipitation.
Implications
The findings of this paper may be generalizable to other states, particularly those in New England, which have similar climates and some fiscal institutions that share similar characteristics.
Abstract
While there is a new and rapidly growing literature on the effects of climatic factors on economic and social outcomes, little research has been conducted to understand the fiscal impact of weather, especially at the sub-state level. Using data from Massachusetts municipalities from 1990 through 2019, this paper estimates government spending as a function of temperature and precipitation while controlling for municipality and year fixed effects and municipality-specific time trends. The results show that weather has statistically significant and economically meaningful effects on local government spending. A 1 degree Fahrenheit increase in the average temperature results in a 3.2 percent increase in real per capita total general fund expenditures. Some government functions, such as public works and general government, are affected more by weather than others. The impact of weather may be persistent and heterogeneous across municipalities. There is some evidence that municipalities adapt to rising temperatures over time.