Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/305683 
Year of Publication: 
2024
Series/Report no.: 
IZA Discussion Papers No. 17241
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We investigate the impact of rising temperatures on firm productivity using longitudinal firm-level balance-sheet data from private sector firms in 14 European countries, combined with detailed weather data. Our findings, based on control-function techniques and fixed-effects regressions, reveal that global warming significantly and negatively impacts firms' TFP. Labor productivity declines markedly as temperatures rise, while capital productivity remains unaffected – indicating that TFP is primarily affected through the labor input channel. Sensitivity tests show that firms involved in outdoor activities, such as agriculture and construction, are more adversely impacted. Manufacturing, capital-intensive, and blue-collar-intensive firms also experience significant productivity declines. Geographically, the negative impact is most pronounced in temperate and mediterranean climate areas.
Subjects: 
climate change
global warming
firm productivity
Total Factor Productivity (TFP)
semiparametric methods to estimate production functions
longitudinal firm-level data
JEL: 
D24
J24
Q54
Document Type: 
Working Paper

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