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Nouhoum Traore - Research Summary

Paris School of Economics

Research Proposal: Temperature Shocks and Firm Dynamics in Developing Countries: Evidence from Côte d'Ivoire

Given irrefutable evidence of climate change, elucidating its impacts on firm dynamics in developing countries is necessary for understanding its implications and the implementation of successful climate change policies. This paper uses historical fluctuations in the number of days with high temperatures in Côte d'Ivoire to analyze its effects on firm’s productivity, and consequently its survival in domestic and foreign market. To guide empirical work, we extend Melitz (2003) model of trade and heterogeneous firms by introducing climate adaptation technology costs. The model shows how an increase in the number of hot days increases the cutoff productivity level and, consequently, increases firm's exit rate. Using Gandhi, Navarro, and Rivers (2013) productivity estimation method, our empirical test of the implication of the model suggests three primary results. First, more hot days reduce firm's productivity. Second, higher temperatures affect firm activity by reducing intrinsic labor productivity. Finally, higher temperatures reduce firm's survival probability in both domestic and foreign market.  These findings show how higher temperatures in developing countries translate to a competiveness loss for firms, thus highlighting an implication of climate change that has not been previously treated.

This working paper has been written with Jeremy D. Foltz, University of Wisconsin-Madison, and has yet to be published.