Climate anomalies and the distribution of income: evidence from Italian municipalities

We study the impact of climate anomalies on the distribution of income at the local level, drawing on a newly constructed dataset of spatially disaggregated income inequality measures covering Italian municipalities from 2000 to 2021. We build geo-referenced indicators of extreme rainfall, temperature anomalies, and severe weather events, and apply panel regressions to estimate their effects on income growth across municipality-level income groups, with particular attention to the lower end of the distribution. Our findings show that climate shocks are locally regressive: they disproportionately harm the poorer 25% of households, significantly reduce income growth for the poorer 50% but negligibly affect the top 1%. Impacts are stronger for severe weather events, with precipitation-related shocks proving more damaging than wind-related ones. The agricultural sector emerges as a key channel mediating the relationship between climate shocks and inequality. By documenting the distributional consequences of severe weather, this study contributes to the growing evidence on the adverse socioeconomic impacts of climate change and deepens our understanding of the mechanisms through which climate shocks exacerbate economic disparities, even in a global north, rich country.