Tarsia, Romano (2024) Heterogeneous effects of weather shocks on firm economic performance. Geography and Environment Discussion Paper Series (45). Department of Geography and Environment, The London School of Economics and Political Science, London, UK.
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Abstract
This paper provides novel, firm-level estimates of the economic damages induced by temperature shocks. Leveraging European firm-level data, this study investigates the heterogeneity of damages across firms characteristics overlooked in aggregate analyses. The analysis consistently highlights negative (positive) impacts on the least (most) productive firms, contributing to both climate economics and the literature on aggregate productivity. Industry-specific effects indicate different susceptibilities across sectors to weather shocks. These results delve into the findings from the pooled sample which reveal a moderate U-shaped relationship between temperature and economic outcomes, suggesting significant adaptation for firms located in warmer areas. Temperature impacts on economic performance manifest with a lag, and varying persistence across firms. Methodologically, this work employs quantitative methods to address the potential drawbacks highlighted in the current climate econometrics discussion.
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