"Do firms mitigate climate impact on employment?

Abstract: Using establishment-level data, we show that firms operating in multiple counties in the United States respond to heat-related damages by reallocating employment towards unaffected locations. Such employment reallocation increases with the severity of damages, is stronger among larger and financially stable firms with more ESG-oriented investors, and is aided by credit availability and competitive labor markets. Reallocation is observed also at the extensive margin of opening of establishments. In the cross-section of industries and the choice of reallocation counties, firm response appears to be aimed at preventing heat-related decline in productivity. In contrast, single-location firms simply downsize in response to heat-related damages. Overall, the mitigation response of multi-establishment firms acts as a “heat insulator” for the economy by reducing the impact of heat shocks on aggregate employment even as it redistributes activity spatially.

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