There is now strong evidence of reductions in labor supply, firm‐ and individual‐level production, and macroeconomic output at the regional and national level in response to extreme heat events (Heal and Park, 2015).

For instance, Zivin and Neidell (2014) find that, in industries with high exposure to climate, workers report lower time spent at work as well as lower time spent on outdoor leisure activities on hot and cold days.<sup>7</sup> At temperatures over 100 ̊F, labor supply in outdoor industries drops by as much as one hour per day compared to temperatures in the 76‐80°F range.

Similarly, firm‐ and individual‐level studies have documented significant output and labor productivity declines due to heat stress. Sudarshan et al (2014) find plant‐level productivity declines among Indian manufacturers, even when controlling for region, firm, and individual‐ specific factors.<sup>8</sup> Hot days above 25 ̊C cause lower productivity in manufacturing plants, with a magnitude of roughly minus 2.8% per ̊C.<sup>9</sup> Even in relatively capital‐intensive industries in developed economies such as the US, extreme heat seems to affect production non‐trivially. In a study of automobile manufacturing plants in the US over the period 1994‐2010, Cachon, Gallino et al. (2012), find that hot days are associated with lower output across the board. At the extreme, a week with six or more days above 90°C reduces that week’s production by about 8%.<sup>10</sup> Finally, extreme heat has been shown to reduce macroeconomic output indicators as well. Hsiang and Deryugina (2014) and Park (2015), find that years with more hot days are associated with lower local income and payroll per capita, controlling for location‐specific unobservables and time‐trends. Hsiang and Deryugina (2014) suggest that, in the average US county, a day with temperatures above 29 ̊C (84 ̊F) lowers annual income by roughly 0.065%, which amounts to ‐ 23.6% lower productivity on a hot day versus an optimal day (15 ̊C or 59 ̊F). Average productivity of individual days declines roughly linearly by 1.5% for each 1 ̊C (1.8 ̊F) increase in daily average temperature beyond 15 ̊C (59 ̊F). Park (2015) finds similar results using US annual payroll data,

> 7 While Zivin and Neidell do not show this, intuitively one might think that extreme temperature and weather events lead to a reduced average flow intensity of economic activity if measured at a high enough level of aggregation.

> 8 Sudarshan et al (2014) are able to show that the effect is driven mostly through reduced worker productivity while working, as opposed to missed days of work due, for instance, to disrupted sleep during warm nights.

> 9 Similarly, Adhvaryu et al (2013) show that manufacturing worker efficiency at the plant level declines substantially on hotter days, an effect that is driven primarily by on‐the‐job task productivity decline as opposed to increased absenteeism. Even earlier work by Niemelä et al. (2002) examines the productivity of call center workers in different ambient temperatures and finds that, above 22 degrees C, each additional degree C is associated with a reduction of 1.8 percent in labor productivity.

> 10 While their study design is unable to fully disentangle the contributions of task productivity decline and missed days of work, or to test for the extent of air conditioning by plant, the results suggest that, even in relatively capital intensive industries of relatively well‐adapted economies, the productivity impacts of extreme temperature may be non‐trivial.

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