Adverse effects of extreme temperature on human development: Empirical evidence from household data for Vietnam across regions

This paper develops a new method to construct the household-based Human Development Index to examine the effects of extreme temperature shocks on human development at the household level. Four waves of the Vietnam Household Living Standard Survey from 2012 to 2018 are used to analyze the effects of temperature shocks on households in different regions. The findings reveal that if temperatures deviate from the long-run average by more than two standard deviations, the Human Development Index score will decline by 2 to 3.5 percentage points, with the most significant effect identified for households in the South and Central Highlands. Additionally, the paper identifies agricultural production, alcohol consumption and energy poverty as channels through which extreme temperatures affect human development. Finally, the findings suggest that policies aimed at mitigating the effects of climate change on vulnerable regions should focus on supporting households in these areas through measures such as developing climate-resistant crops, encouraging agricultural adaptation strategies, integrating local labor markets, and improving energy access.