Impact of Temperature Uncertainty on Firm Growth: A Grid-Level Analysis

Jangho Yang and Christian Schoder

No 11020, Policy Research Working Paper Series from The World Bank

Abstract: This study examines the impact of temperature uncertainty on firm fixed capital growth using a unique dataset that merges extensive firm-level financial data with detailed grid-level weather data. The analysis reveals a strong negative relationship between temperature uncertainty and fixed capital growth. Furthermore, the impact varies significantly across industries with differing levels of investment irreversibility and among countries with varying income levels. Firms in industries characterized by high investment irreversibility and those operating in higher-income countries experience more pronounced declines in fixed asset growth due to temperature uncertainty.

Date: 2025-01-08
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