Conference Agenda

Hotter temperatures can reduce firms performance due to decline in productivity of labor. The impacts associated with exogenous temperature shocks are expected to affect vulnerable firms and workers more strongly, with impacts varying across firm size and location. This heterogeneity in the impacts of climate change across a large landscape, such as India, requires attention. Using Recentered Influence Function (RIF) fixed-effects regression approach, we estimate unconditional reduced-form effects of the temperature distribution on firms productivity with a particular focus on labor channel. The distributional impacts of the increasing heat incidence is explored across low and high productivity firms, firms located in districts which are over-exposed and under-exposed to heat and firms located in rural and urban areas. The results indicate that the temperature rise has detrimental effects on firm-level productivity with negative effects thereof concentrated in the low productivity firms. We find heterogeneity in the impacts of temperature rise on labor productivity and capital productivity with the concentration of impacts found largely in firms located in over-exposed districts and/or rural areas. Exploring an important labor market implication of declining labor productivity through gender-differentiated impacts of temperature shocks on firm-level labor demand, we find that the temperature rise significantly reduces female work-days more than male work-days as well as work-days of permanent workers more than work-days of casual workers.