Do firms mitigate climate impact on employment? Evidence from US heat shocks

58 Pages Posted: 20 Dec 2023

See all articles by Viral V. Acharya

Viral V. Acharya

New York University (NYU) - Leonard N. Stern School of Business; New York University (NYU) - Department of Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); National Bureau of Economic Research (NBER)

Abhishek Bhardwaj

Tulane University

Tuomas Tomunen

Boston College - Carroll School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: August 15, 2023

Abstract

How do firms mitigate the impact of rising temperatures on employment? Using establishment-level data, we show that firms operating in multiple counties in the United States respond to heat shocks by reducing employment in the affected locations and increasing it in unaffected locations, whereas single-location firms simply downsize. Workforce reallocation, aimed at preventing heat-related decline in labor productivity, is stronger among larger, financially stable firms with more ESG-oriented investors. The scale of this response increases with the severity of climate disasters and is aided by credit availability and competitive labor markets. Climate risk management by firms mitigates the impact of heat shocks on aggregate employment but induces a spatial redistribution of economic activity.

Keywords: Climate change, Mitigation, Heat risk, Global warming, Adaptation

JEL Classification: D22, E24, G31, J21, L23, Q54

Suggested Citation

Acharya, Viral V. and Acharya, Viral V. and Bhardwaj, Abhishek and Tomunen, Tuomas, Do firms mitigate climate impact on employment? Evidence from US heat shocks (August 15, 2023). Available at SSRN: https://ssrn.com/abstract=4660007 or http://dx.doi.org/10.2139/ssrn.4660007

Viral V. Acharya

New York University (NYU) - Leonard N. Stern School of Business ( email )

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HOME PAGE: http://www.stern.nyu.edu/~vacharya

New York University (NYU) - Department of Finance ( email )

Stern School of Business
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Centre for Economic Policy Research (CEPR) ( email )

London
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European Corporate Governance Institute (ECGI) ( email )

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Belgium

National Bureau of Economic Research (NBER) ( email )

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Abhishek Bhardwaj (Contact Author)

Tulane University ( email )

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United States

HOME PAGE: http://www.abhishek-bhardwaj.com

Tuomas Tomunen

Boston College - Carroll School of Management ( email )

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United States

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