E. Somanathan, Rohini Somanathan, Anant Sudarshan, and Meenu Tewari
Hotter years are associated with lower economic output in developing countries. We show that the effect of temperature on labor is an important part of the explanation. Using microdata from selected firms in India, we estimate reduced worker productivity and increased absenteeism on hot days. Climate control significantly mitigates productivity losses. In a national panel of Indian factories, annual plant output falls by about 2% per degree Celsius. This response appears to be driven by a reduction in the output elasticity of labor. Our estimates are large enough to explain previously observed output losses in cross-country panels.
Areas of Focus: Climate Change, Climate Economics, EPIC-India
Definition
Climate Change
Climate change is an urgent global challenge. EPIC research is helping to assess its impacts, quantify its costs, and identify an efficient set of policies to reduce emissions and adapt...
Definition
Climate Economics
Climate change will affect every sector of the economy, both locally and globally. EPIC research is quantifying these effects to help guide policymakers, businesses, and individuals working to mitigate and...
Definition
EPIC-India
As the world’s fastest-growing carbon emitter and second most-polluted country, India is central to the global energy challenge. EPIC’s robust team in India works hand-in-hand with government leaders to implement...