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Entry, exit and market structure in a changing climate

Author

Listed:
  • Cascarano, Michele
  • Natoli, Filippo
  • Petrella, Andrea
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.

Suggested Citation

  • Cascarano, Michele & Natoli, Filippo & Petrella, Andrea, 2022. "Entry, exit and market structure in a changing climate," MPRA Paper 112868, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:112868
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    References listed on IDEAS

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    Cited by:

    1. Michele Cascarano & Filippo Natoli, 2023. "Temperatures and search: evidence from the housing market," Temi di discussione (Economic working papers) 1419, Bank of Italy, Economic Research and International Relations Area.
    2. Filippo Natoli, 2023. "The macroeconomic effects of temperature surprise shocks," Temi di discussione (Economic working papers) 1407, Bank of Italy, Economic Research and International Relations Area.

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    More about this item

    Keywords

    climate change; temperatures; firm dynamics;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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