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Prof. Andrea Chiavari

University of Oxford, United Kingdom

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Authors: Andrea Chiavari, Andrea Caggese, Sampreet Goraya, and Carolina Villegas-Sanchez

Abstract: This paper employs a general equilibrium framework to analyze how temperature affects firm-level demand, productivity, and input allocative efficiency, informing aggregate productivity damages due to climate change. Using data from Italian firms and detailed climate data, it uncovers a sizeable negative effect of extreme temperature on firm-level productivity and revenue-based marginal product of capital. Based on these estimates, the model generates aggregate productivity losses higher than previously thought, ranging from 0.60 to 6.82 percent depending on the scenario and the extent of adaptation. Additionally, climate change exacerbates Italian regional disparities.

Keywords: Climate Change, Aggregate Productivity, Firms, Allocative Efficiency

Full Text: Climate Change, Firms, and Aggregate Productivity