Entry, exit and market structure in a changing climate

Cascarano, Michele and Natoli, Filippo and Petrella, Andrea (2022): Entry, exit and market structure in a changing climate.

Abstract

Climate change has long run effects on the size and composition of a country's corporate sector. Using administrative data on the universe of Italian firms, we find that an increase in the incidence of very hot days over a multiyear period persistently reduces the growth rate of active firms in the market. This is due to a drop in firm entry and an increase in firm exit, with relocation playing a minor role. A firm-level investigation reveals a dichotomy between smaller firms, which suffer from high temperatures, and larger firms that successfully adapt, increasing production and net revenues. According to an average climatic scenario, the projected evolution of local temperatures will impact corporate demography further, also exacerbating the divergent effects across warmer and colder areas over the current decade.

• Item Type: MPRA Paper
• Language: English
• Keywords: climate change; temperatures; firm dynamics
• Subjects: D - Microeconomics > D2 - Production and Organizations > D22 - Firm Behavior: Empirical Analysis; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q54 - Climate ; Natural Disasters and Their Management ; Global Warming; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R12 - Size and Spatial Distributions of Regional Economic Activity

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