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Temperature and Local Industry Concentration

Author

Listed:
  • Jacopo Ponticelli
  • Qiping Xu
  • Stefan Zeume

Abstract

We use plant-level data from the US Census of Manufacturers to study the short and long run effects of temperature on manufacturing activity. We document that temperature shocks significantly increase energy costs and lower the productivity of small manufacturing plants, while large plants are mostly unaffected. In US counties that experienced higher increases in average temperatures between the 1980s and the 2010s, these heterogeneous effects have led to higher concentration of manufacturing activity within large plants, and a reallocation of labor from small to large manufacturing establishments. We offer a preliminary discussion of potential mechanisms explaining why large manufacturing firms might be better equipped for long-run adaptation to climate change, including their ability to hedge across locations, easier access to finance, and higher managerial skills.

Suggested Citation

  • Jacopo Ponticelli & Qiping Xu & Stefan Zeume, 2023. "Temperature and Local Industry Concentration," Working Papers 23-51, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:23-51
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    File URL: https://www2.census.gov/library/working-papers/2023/adrm/ces/CES-WP-23-51.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Climate Change; Manufacturing; US; Local Industry Concentration;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • G3 - Financial Economics - - Corporate Finance and Governance
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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