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

Viral Acharya, Abhishek Bhardwaj and Tuomas Tomunen

No 18710, CEPR Discussion Papers from Centre for Economic Policy Research

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; Global warming; Adaptation (search for similar items in EconPapers)
JEL-codes: D22 E24 G31 J21 L23 Q54 (search for similar items in EconPapers)
Date: 2023-12
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