The Impact of Temperature on Productivity and Labor Supply: Evidence from Indian Manufacturing

This paper shows that high temepratures may reduce manufacturing output by lowering worker productivity via heat stress. Using an annual panel of manufacturing plants in India, and daily primary micro-data from case-study firms, Somanathan et al. (2014) find that (i) output in labor-intensive settings decreases at high temperatures by about 3 percent per degree Celsius (ii) workplace climate control may enable adaptation and (iii) sustained heat may reduce worker attendance. These mechanisms might contribute to the negative correlation between temperature and aggregate output observed in poor countries. Failing to account for reduced labor productivity may underestimate the costs of climate change.

Authors

E. Somanathan

Indian Statistical Institute

Rohini Somanathan

Delhi School of Economics

Meenu Tewari

University of North Carolina - Chapel Hill