Do Firms Adapt to Rising Temperatures? Evidence from Establishment-Level Data

61 Pages Posted: 6 May 2020 Last revised: 23 Aug 2021

See all articles by Zuben JIN

Zuben JIN

Southwestern University of Finance and Economics (SWUFE)

Frank Weikai Li

Singapore Management University - Lee Kong Chian School of Business

Yupeng Lin

National University of Singapore

Zilong Zhang

Zhejiang University

Date Written: August 20, 2021

Abstract

Using detailed information on establishments owned by U.S. public firms from 1990 to 2012, we show that higher abnormal temperatures over the previous five years in a county lead to a significant reduction in local employment and the number of establishments. The decline in employment and establishments is larger for firms in non-tradable sectors and consumer services and retailing industries, and when managers are likely to care more about global warming. In addition, we find that establishments located in abnormally hot counties seek to hire new workers with greater education and IT skills. Our findings are consistent with the notion that it is the declining local consumer demand, rather than deteriorating employee productivity, that drives firms’ responses. Overall, we provide large-sample evidence on firms’ adaptation to climate change and the resultant impacts on the local economy.

Keywords: High temperatures, climate change, employment, upskilling, economic establishments, adaptation

JEL Classification: G40, G41, Q54

Suggested Citation

JIN, Zuben and Li, Frank Weikai and Lin, Yupeng and Zhang, Zilong, Do Firms Adapt to Rising Temperatures? Evidence from Establishment-Level Data (August 20, 2021). Available at SSRN: https://ssrn.com/abstract=3573260 or http://dx.doi.org/10.2139/ssrn.3573260

Zuben JIN (Contact Author)

Southwestern University of Finance and Economics (SWUFE) ( email )

55 Guanghuacun St,
Chengdu, Sichuan 610074
China

Frank Weikai Li

Singapore Management University - Lee Kong Chian School of Business ( email )

469 Bukit Timah Road
Singapore 912409
Singapore

Yupeng Lin

National University of Singapore ( email )

15 Kent ridge drive
Singapore
Singapore

HOME PAGE: http://sites.google.com/site/scottlinyupeng/

Zilong Zhang

Zhejiang University ( email )

38 Zheda Road
Hangzhou, Zhejiang 310058
China

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