The Effect of Heat Stress on Labor Productivity: What Are the Underlying Mechanisms?

Merve Betul Gokce, Enver Sait Kurtaran and Zeynep Yilmaz

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: This paper examines how extreme heat affects firm-level labor productivity using comprehensive administrative data covering all registered non-financial firms in Türkiye from 2009 to 2023.Türkiye offers an informative setting as a middle-income economy characterized by high climate exposure, substantial regional heterogeneity, and uneven capacity to adapt. We link firm records to high-resolution district-level weather data and estimate panel models that exploit within-firm variation in annual heat exposure. We find that extreme heat significantly reduces productivity. Ten additional days per year with maximum temperatures above 35°C are associated with a 0.4 percent decline in labor productivity; at 37–38°C, the effect rises to 0.7 percent. The effects are heterogeneous: low-technology manufacturing, customer-facing services, micro firms, and financially constrained firms are most vulnerable, while high-technology firms and large enterprises show little or no impact. We distinguish between supply- and demand-side mechanisms using complementary data on worker attendance, electricity consumption, commercial traffic, firm sales, and tourism arrivals. On the supply side, extreme heat reduces days worked, increases absenteeism, raises electricity costs, and disrupts goods transport. On the demand side, hot days reduce tourist arrivals and depress sales in accommodation and food services.

Keywords: Temperature; Labor productivity; Firm performance; Developing economies (search for similar items in EconPapers)
JEL-codes: D22 J24 O13 Q54 (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN ... g+Paperss/2026/26-11 (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:tcb:wpaper:2611

Access Statistics for this paper

More papers in Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey Contact information at EDIRC.
Bibliographic data for series maintained by Sermet Pekin () and Ilker Cakar () and ().