Adjusting to Rain Before It Falls

• 成果类型: Article
• 署名作者: Downey, Mitch; Lind, Nelson; Shrader, Jeffrey G.
• 署名单位: Stockholm University; Emory University; Columbia University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2023.4697
• 发表日期: 2023
• 页码: 7399-7422
• 关键词: economics; behavior and behavioral decision making; environment; LABOR

摘要

Unchecked climate change will cause precipitation volatility to increase around the world, leading to economic damages in the face of adjustment costs. We estimate these damages for construction-an economically important, climate exposed industry. Empirically, employment falls in response to forecasted rainfall and more so as the forecast horizon increases. This pattern allows for identification of labor adjustment costs via a multisector model of local labor markets calibrated to our estimates. When rainfall is anticipatable one month ahead, construction firms pay 10% of monthly profit to adjust. They pay less than 1% for rainfall anticipatable six months ahead. Without further adaptation or forecast improvements, increased rainfall volatility due to climate change is projected to lead to more costly adjustment.