Do High Temperatures Affect Firm Demography? Evidence From Italy

This study analyses the impact of high temperatures and heat stress on Italian firm demography during 2009–2022. Combining provincial-firm-level data with a high-resolution multidecadal meteorological dataset, we investigate whether high temperatures—absolute and anomalous—affect firm entry and exit rates. We find that high temperatures significantly increase firm exit rates, especially among smaller firms and those in warmer provinces, revealing strong heterogeneity across firm sizes, industry sectors and climatic zones, while entry rates remain largely unaffected. Our results are robust to various robustness checks. The evidence reveals that Italian firms exhibit limited adaptive capacity, as exit rates rise with high absolute temperatures even in the absence of extreme anomalies. This suggests a structural vulnerability within the Italian firm landscape, indicating that the consequences of high temperatures are not confined to extreme events but already manifest during periods that should represent normal operating conditions for firms. Strengthening firms' adaptive capacity and supporting smaller businesses in vulnerable regions are key priorities for enhancing business resilience to high temperatures.