TY  - RPRT
        AU  - Otrachshenko, Vladimir
AU  - Vasil’, Roman
        TI  - Temperature and Firms’ Performance: Outcomes, Mechanisms, and Coping Strategies
        PY  - 2026/Jun/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 18746
        UR  - https://www.iza.org/publications/dp18746
        AB  - This paper examines the impact of weather conditions on firms' performance in Slovakia. By employing a unified framework that analyzes the outcomes, mechanisms, and coping strategies of firms across the entire economy, we contribute to a better understanding of the microeconomic foundations of weather's impact on economic development. Specifically, combining data on the universe of firms from 2013 to 2023 with temperature and precipitation data in a panel framework, we find that annual losses in sales, revenue, and profit associated with a 1⁰C increase in temperature are substantial in heat-sensitive industries, whereas firms in non-heat-sensitive industries are generally unaffected. The findings suggest that the main mechanism underlying these relationships is a decline in total factor productivity driven by rising temperatures. To cope with the adverse impact of temperature, firms in heat-sensitive industries primarily adopt cost-reduction strategies. Future projections suggest a sharp decline in firms' performance, implying significant future economic losses for the economy.
        KW  - coping strategies
KW  - firms
KW  - mechanisms
KW  - temperature
KW  - Slovakia
        ER  -