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Do Firms Mitigate Climate Impact on Employment? Evidence from US Heat Shocks

Author

Listed:
  • Acharya, Viral
  • Bhardwaj, Abhishek
  • Tomunen, Tuomas

Abstract

Using establishment-level data, we document that firms operating in multiple U.S. counties respond to heat-related damages by reallocating employment and job postings as well as moving new establishment openings, from affected to unaffected locations. The reallocation intensifies with heat-related damage severity being acute, chronic and compounded with other natural disasters, and is especially pronounced among larger, financially stable firms with ESG-oriented investors. Overall, multi-establishment firms act as a ``heat insulator’’ for the economy by reducing the impact of heat shocks on aggregate employment, wage growth, labor force participation, and establishment entry, even as their reallocation response redistributes economic activity spatially.

Suggested Citation

  • Acharya, Viral & Bhardwaj, Abhishek & Tomunen, Tuomas, 2023. "Do Firms Mitigate Climate Impact on Employment? Evidence from US Heat Shocks," CEPR Discussion Papers 18710, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:18710
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    File URL: https://cepr.org/publications/DP18710
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    Keywords

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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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