Working Paper: CEPR ID: DP18392
Authors: Jacopo Ponticelli; Qiping Xu; Stefan Zeume
Abstract: We use plant-level data from the US Census of Manufacturers to study the short and long run effects of temperature on manufacturing activity. We document that temperature shocks significantly increase energy costs and lower the productivity of small manufacturing plants, while large plants are mostly unaffected. In US counties that experienced higher increases in average temperatures between the 1980s and the 2010s, these heterogeneous effects have led to higher concentration of manufacturing activity within large plants, and a reallocation of labor from small to large manufacturing establishments. We offer a preliminary discussion of potential mechanisms explaining why large manufacturing firms might be better equipped for long-run adaptation to climate change, including their ability to hedge across locations, easier access to finance, and higher managerial skills.
Keywords: No keywords provided
JEL Codes: Q54; O14; G3; L11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Climate change (Q54) | Industry concentration (L69) |
| Temperature shocks (E32) | Energy costs (Q41) |
| Temperature shocks (E32) | Productivity of small manufacturing plants (L23) |
| Higher average temperature increases (Q54) | Concentration of manufacturing activity within large plants (L23) |
| Higher average temperature increases (Q54) | Reallocation of labor from small to large manufacturing establishments (L23) |
| Higher average temperature increases (Q54) | Herfindahl-Hirschman concentration index (L19) |