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Riders on the storm: How do firms navigate production and market conditions amid El Nino?

Author

Listed:
  • Maria Bas

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Caroline Paunov

    (OCDE - Organisation de Coopération et de Développement Economiques = Organisation for Economic Co-operation and Development)

Abstract

his paper investigates how heavy rainfalls resulting from the 2002–03 El Ni˜ no climate pattern affect Ecuadorian firms' production and market conditions. We show that affected firms' revenue productivity (TFP-R) and markups decrease. This is due to production efficiency losses (TFP-Q) and higher marginal costs of initially less efficient firms. Decreased product output prices in response to lower product demand explain the impact on initially more efficient firms. However, the shock neither affects market shares nor survival rates of initially less efficient firms. Consequently, the productivity distribution of Ecuador's industry is not affected by the shock. We also show a swift recovery of production and market demand in the immediate aftermath of the shock. Impacts in 2002–03 are like those of the 1997–98 rainfall shock. Differentiating firms by their TFP-R rather than their production efficiency indicates firms with better (worse) market positions can mitigate the negative impacts of the shock more (less).

Suggested Citation

  • Maria Bas & Caroline Paunov, 2025. "Riders on the storm: How do firms navigate production and market conditions amid El Nino?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-04910148, HAL.
    • Handle: RePEc:hal:cesptp:hal-04910148
    DOI: 10.1016/j.jdeveco.2024.103374
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