Mandatory Climate Adaptation: Evidence from Firms and Workplace Safety

Abstract

Strategies to mitigate the effects of climate change exist, but will firms adopt them? Using confidential micro-data from 18 million worker’s compensation claims, high-frequency weather data, and records of firms’ financial performance, we explore the effects of a mandatory adaptation policy on the adverse consequences of hotter temperature. We document that hotter temperature increases injury risk substantially. Consistent with a model in which adaptation is technically feasible but costly to firms, we find evidence of elevated accident risk across a range of settings, including in both indoor and outdoor industries. A workplace heat safety mandate significantly reduces injuries, with no discernible effect on firms’ profits and employment, suggesting that firms may not operate at the Pareto frontier when it comes to investing in adaptation.

Presented by Nora Pankratz.