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Heterogeneous effects of weather shocks on firm economic performance

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  • Tarsia, Romano

Abstract

This paper provides novel firm-level estimates of the economic damages caused by temperature shocks to European firms. I rely on a panel data analysis to show wide heterogeneities in the impact of temperature shocks, which depend on firm characteristics. This paper reveals the importance of micro-level data to reduce the uncertainty in climate damages estimates, as the average relationship between temperature and economic outcomes masks firms’ different susceptibilities to weather shocks. These create both winners and losers, harming less productive and smaller firms, particularly those in warmer regions, while benefiting more productive ones. This paper highlights the distributional effects of climate change, and offers insights for targeted adaptation policies.

Suggested Citation

  • Tarsia, Romano, 2024. "Heterogeneous effects of weather shocks on firm economic performance," LSE Research Online Documents on Economics 128533, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:128533
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    File URL: http://eprints.lse.ac.uk/128533/
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    More about this item

    Keywords

    weather; climate change; firms; climate damages; economic performance;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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