Economic Impact of Climate Change

67 Pages Posted: 1 Sep 2022

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

Norges Bank; University of Zurich - Department Finance

Adrian Lam

University of Pittsburgh - Katz Graduate School of Business; University of Amsterdam - Amsterdam Center for Law & Economics (ACLE)

Multiple version iconThere are 2 versions of this paper

Date Written: August 30, 2022

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 30, 2022). Nova SBE Working Paper Series No. 645, 2022, Available at SSRN: https://ssrn.com/abstract=4205144 or http://dx.doi.org/10.2139/ssrn.4205144

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 (Contact Author)

Nova School of Business and Economics ( email )

Campus de Carcavelos
Rua da Holanda, 1
Carcavelos, 2775-405
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

Norges Bank ( email )

P.O. Box 1179
Oslo, N-0107
Norway

University of Zurich - Department Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Adrian Lam

University of Pittsburgh - Katz Graduate School of Business ( email )

Pittsburgh, PA 15260
United States

University of Amsterdam - Amsterdam Center for Law & Economics (ACLE) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

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