Climate change, firms and aggregate productivity

Andrea Caggese, Andrea Chiavari, Sampreet Goraya and Villegas‑Sanchez, Carolina

Research Bulletin, 2025, vol. 132

Abstract: Our paper uses a general equilibrium framework to examine the effects of temperature on firm-level demand, productivity and input allocative efficiency. Using data from Italian firms and detailed climate data, it uncovers a sizeable negative effect of extreme temperatures on firm-level productivity. Based on these estimates, the model generates aggregate productivity losses from local temperature fluctuations that are higher than previously thought, ranging from 0.60% to 6.82% depending on the scenario and the extent of adaptation. Notably, these losses are approximately four times greater than those estimated by averaging firm-level losses in a representative firm model, which does not capture frictions that alter allocative efficiency across firms. Therefore, incorporating our framework into Integrated Assessment Models is likely to increase the estimated economic costs of climate change. JEL Classification: Q54, D24, D22, O44

Keywords: Aggregate Productivity; Allocative Efficiency; Climate Change; Firms (search for similar items in EconPapers)
Date: 2025-06
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.ecb.europa.eu//press/research-publicat ... 4~a3ba3cb524.en.html (text/html)
https://www.ecb.europa.eu//press/research-publicat ... 24~a3ba3cb524.en.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbrbu:2025:0132:

Access Statistics for this article

More articles in Research Bulletin from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().