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Climate Change, Firms, and Aggregate Productivity

Author

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  • Caggese, Andrea
  • Chiavari, Andrea
  • Goraya, Sampreet
  • Villegas-Sanchez, Carolina

Abstract

This paper employs a general equilibrium framework to analyze how temperature affects firm-level demand, productivity, and input allocative efficiency, informing aggregate productivity damages due to climate change. Using data from Italian firms and detailed climate data, it uncovers a sizeable negative effect of extreme temperature on firm-level productivity and revenue-based marginal product of capital. Based on these estimates, the model generates aggregate productivity losses higher than previously thought, ranging from 0.60 to 6.82 percent depending on the scenario and the extent of adaptation. Additionally, climate change exacerbates Italian regional disparities.

Suggested Citation

  • Caggese, Andrea & Chiavari, Andrea & Goraya, Sampreet & Villegas-Sanchez, Carolina, 2024. "Climate Change, Firms, and Aggregate Productivity," CEPR Discussion Papers 19164, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:19164
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    References listed on IDEAS

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    1. E. Somanathan & Rohini Somanathan & Anant Sudarshan & Meenu Tewari, 2021. "The Impact of Temperature on Productivity and Labor Supply: Evidence from Indian Manufacturing," Journal of Political Economy, University of Chicago Press, vol. 129(6), pages 1797-1827.
    2. Nordhaus, William D, 1977. "Economic Growth and Climate: The Carbon Dioxide Problem," American Economic Review, American Economic Association, vol. 67(1), pages 341-346, February.
    3. Geoffrey Heal & Jisung Park, 2016. "Editor's Choice Reflections—Temperature Stress and the Direct Impact of Climate Change: A Review of an Emerging Literature," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 10(2), pages 347-362.
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    More about this item

    Keywords

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    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth

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