Heterogeneous effects of weather shocks on firm economic performance

This paper provides novel firm-level estimates of the economic damages caused by temperature shocks to European firms. I rely on a panel data analysis to show wide heterogeneities in the impact of temperature shocks, which depend on firm characteristics. This paper reveals the importance of micro-level data to reduce the uncertainty in climate damages estimates, as the average relationship between temperature and economic outcomes masks firms’ different susceptibilities to weather shocks. These create both winners and losers, harming less productive and smaller firms, particularly those in warmer regions, while benefiting more productive ones. This paper highlights the distributional effects of climate change, and offers insights for targeted adaptation policies.