Entry, exit, and market structure in a changing climate

Michele Cascarano, Filippo Natoli and Andrea Petrella

European Economic Review, 2025, vol. 176, issue C

Abstract: Extreme temperatures have long-run effects on the size and composition of a country’s business sector. Administrative data on the universe of Italian firms show that higher temperatures slow the growth of active firms in the market, mainly due to a drop in entry rates and an increase in exit rates in warmer areas. Balance sheet data analyses suggest a dichotomy between large, young companies, which adapt and survive improving their profitability, and older, smaller-sized firms persistently suffering from hot temperatures. According to an average climate scenario, temperatures will impact business dynamics further in the future, exacerbating the differences between warmer and colder areas.

Keywords: Climate change; Temperatures; Firm dynamics (search for similar items in EconPapers)
JEL-codes: D22 Q54 R12 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:176:y:2025:i:c:s0014292125000777

DOI: 10.1016/j.euroecorev.2025.105027

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