HOW DOES CLIMATE RISK AFFECT EMPLOYMENT ADJUSTMENT? FIRM-LEVEL EVIDENCE FROM CHINA

Dongmin Kong (), Zihan Xiong () and Ni Qin ()
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Dongmin Kong: Huazhong University of Science and Technology. China
Zihan Xiong: Huazhong University of Science and Technology. China
Ni Qin: Huazhong University of Science and Technology, China

Bulletin of Monetary Economics and Banking, 2024, vol. 27, issue 4, 655-680

Abstract: In recent years, global climate risk has been on the rise, with extreme weather and climate-related events becoming more frequent and severe, garnering increased attention. We explore the impact of climate risk on employment adjustments using a dataset of small, medium and micro enterprises in China. Our findings indicate that as climate risk increases, employment adjustment rates increase, net employment growth rates decrease, and job destruction intensifies. These results remain robust in tests for endogeneity and robustness tests. Specifically, extreme weather events impact companies’ factories and production facilities, increasing operating costs and affecting overall production and sales. As a result, labor is underutilized, and companies have to adjust production. Under these conditions, companies face financing constraints and tend to hold cash to mitigate risk, leading them to reduce labor costs and cut employment. Our findings are particularly significant for private enterprises, firms located in the eastern and central regions, and manufacturing companies

Keywords: Climate risk; Employment adjustment; SMMEs; China (search for similar items in EconPapers)
JEL-codes: D01 D21 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:27:y:2024:i:4d:p:655-680

DOI: 10.59091/2460-9196.2416

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