Economic Impact of Climate Change

65 Pages Posted: 9 Dec 2020 Last revised: 12 Aug 2021

See all articles by Claudia Custodio

Claudia Custodio

Imperial College London; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Miguel A. Ferreira

Nova School of Business and Economics; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Emilia Garcia-Appendini

University of Zurich - Department of Banking and Finance

Adrian Lam

Imperial College London

Date Written: August 12, 2021

Abstract

We estimate the economic impact of climate change by exploiting variation in local temperature across suppliers of the same client. We find that suppliers experiencing a 1°C increase in average daily temperature decrease their sales by 2%. The effect is more pronounced among suppliers in manufacturing and heat-sensitive industries, which is consistent with lower labor productivity and supply when temperatures are higher. Financially constrained suppliers are more affected due to their lack of financial flexibility to adapt to changes in temperatures. We also find that episodes of extremely hot and cold weather lead to large drops in sales.

Keywords: Climate change, Climate finance, Economic costs, Firm sales, Production networks, Productivity, Financial constraints

JEL Classification: G31, G32, L11, L14, Q54

Suggested Citation

Custodio, Claudia and Ferreira, Miguel Almeida and Garcia-Appendini, Emilia and Lam, Adrian, Economic Impact of Climate Change (August 12, 2021). Available at SSRN: https://ssrn.com/abstract=3724940 or http://dx.doi.org/10.2139/ssrn.3724940

Claudia Custodio

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Miguel Almeida Ferreira

Nova School of Business and Economics ( email )

Campus de Campolide
Lisbon, 1099-032
Portugal

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Emilia Garcia-Appendini

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Adrian Lam (Contact Author)

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

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