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Do Firms Mitigate Climate Impact on Employment? Evidence from US Heat Shocks

Author

Listed:
  • Acharya, Viral
  • Bhardwaj, Abhishek
  • Tomunen, Tuomas

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.

Suggested Citation

  • Acharya, Viral & Bhardwaj, Abhishek & Tomunen, Tuomas, 2023. "Do Firms Mitigate Climate Impact on Employment? Evidence from US Heat Shocks," CEPR Discussion Papers 18710, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18710
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    More about this item

    Keywords

    Climate change; Mitigation; Global warming; Adaptation;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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