Research Paper of the Gasperini Awards

Does Climate Change Affect Firm Output? Identifying Supply Effects 

Claudia Custodio
Imperial College London; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Miguel A. Ferreira
Nova School of Business and Economics; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Emilia Garcia-Appendini
Norges Bank; University of Zurich – Department Finance

Adrian Lam
University of Pittsburgh – Katz Graduate School of Business; University of Amsterdam – Amsterdam Center for Law & Economics (ACLE)


We estimate the supply-side effects of climate change on firm output by exploiting variation in local average temperature across suppliers of the same client in the United States. A 1°C increase in temperature decreases annual sales by 2.5%. This effect is non-linear, peaking among suppliers located in regions with the largest increases in temperature and in cooler regions. Manufacturing and heat-sensitive industries are more affected, consistent with a reduction in labor productivity and labor supply when temperatures are higher. Non-diversified and financially constrained firms are also more affected, supporting the importance of operational and financial flexibility in adapting to climate change.

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