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Climate Change and the Decline of Labor Share

Author

Listed:
  • Xincheng Qiu

    (Guanghua School of Management, Peking University)

  • Masahiro Yoshida

    (Department of Political Science and Economics, Waseda University, Tokyo)

Abstract

We study the impact of climate change on the labor share. Using a newly constructed dataset combining US county-level labor shares with climate variables, we find that extreme temperatures reduce labor share. This adverse effect is more pronounced in industries with higher outdoor exposure and automation potential. We also show that extreme temperatures accelerate the adoption of industrial robots. Overall, climate change accounts for 14% of the decline in labor share during 2001–2019. In the last century, however, the opposing effects of decreased cold days and increased hot days offset each other, consistent with the well-documented constancy of labor share.

Suggested Citation

  • Xincheng Qiu & Masahiro Yoshida, 2025. "Climate Change and the Decline of Labor Share," Working Papers 2507, Waseda University, Faculty of Political Science and Economics.
    • Handle: RePEc:wap:wpaper:2507
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    References listed on IDEAS

    as
    1. Ezra Oberfield & Gene M. Grossman, 2022. "The Elusive Explanation for the Declining Labor Share," Annual Review of Economics, Annual Reviews, vol. 14(1), pages 93-124, August.
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    4. Ishan B. Nath & Valerie A. Ramey & Peter J. Klenow, 2024. "How Much Will Global Warming Cool Global Growth?," NBER Working Papers 32761, National Bureau of Economic Research, Inc.
    5. Dongya Koh & Raül Santaeulàlia‐Llopis & Yu Zheng, 2020. "Labor Share Decline and Intellectual Property Products Capital," Econometrica, Econometric Society, vol. 88(6), pages 2609-2628, November.
    6. Park, R. Jisung & Pankratz, Nora & Behrer, A. Patrick, 2021. "Temperature, Workplace Safety, and Labor Market Inequality," IZA Discussion Papers 14560, Institute of Labor Economics (IZA).
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    More about this item

    Keywords

    climate change; labor share; automation;
    All these keywords.

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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