This paper presents a general equilibrium structural framework that separates the effects of temperature on firm-level demand, productivity, and input misallocation to examine the aggregate productivity losses caused by climate change. By analyzing data from Italian firms, that cover approximately 75% of aggregate gross output, and incorporating detailed climate data, the paper reveals an inverted U-shaped relationship between temperature and firm-level outcomes such as productivity and capital misallocation. Leveraging these micro elasticities, the paper projects the aggregate productivity losses resulting from climate change scenarios. The findings indicate a significant and nonlinear relationship between climate change and aggregate productivity, with a projected 2-degree Celsius increase leading to a 1.8% decline. Doubling the expected increase to 4 degrees exacerbates the decline nearly fourfold to approximately 6.4%. Finally, the analysis highlights widening regional disparities as a consequence of climate change.
Environmental Economics Seminar Series
Every Monday from 4.05 to 5.05 pm in Michaelmas Term
In person details: Manor Road Building Skills Lab - Tea and cake will be served 15 minutes beforehand.
Zoom details: Zoom link - Meeting ID: tbc - Password: 111133
For further information please contact Fulvia Marotta: fulvia.marotta@ouce.ox.ac.uk