Working Paper: NBER ID: w31533
Authors: Jacopo Ponticelli; Qiping Xu; Stefan Zeume
Abstract: We use plant-level data from the U.S. Census of Manufacturers to study the short- and long-run effects of temperature on manufacturing activity. We find that high-temperature shocks significantly increase energy costs and lower productivity for small plants, while large plants are mostly unaffected. Commuting zones with higher increases in average temperatures between the 1980s and the 2010s experience a decline in the number of small plants, reallocation of labor from small to large plants, and higher local labor market concentration. Differences in costs per unit of energy, managerial skills, and access to finance contribute to explaining our results.
Keywords: temperature; manufacturing activity; climate change; industry concentration
JEL Codes: G3; L11; O14; Q54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Temperature shocks (E32) | Increased energy costs (Q41) |
| Temperature shocks (E32) | Decreased productivity of small manufacturing plants (L69) |
| Increased average temperatures (Q54) | Reallocation of labor from small to large manufacturing plants (L23) |
| Increased average temperatures (Q54) | Decline in small plant numbers (Q23) |
| Increased average temperatures (Q54) | Increase in concentration of manufacturing activity within larger firms (L23) |
| Temperature shocks (E32) | Heterogeneous response to temperature changes among different sized establishments (D29) |