Firm Responses to Climate Change: Exit and Voice

Publication Year



Firms wield considerable influence over government responses to climate change. When and how do firms respond to their climate change vulnerability? We argue that companies update their beliefs about the immediacy of climate change in response to direct experiences such as extreme heat. These updated beliefs lead firms facing future damages to engage in economic and political strategies of exit or voice to minimize climate change risks. To test these claims, we construct a novel firm-level measure of vulnerability to global warming using data on 6.6 million establishments and a spatial economic assessment model of climate change. After firms experience extreme heat, those facing future global warming damages lobby more on climate-related issues, exercising their voice. The effect is strongest among firms with fewer exit options. There is limited evidence of delayed economic adaptation. Our findings point to the importance of firm geography for understanding business influence in politics, and help to explain how global warming will reshape political coalitions as its material effects are increasingly felt.

Publication Status
Working Papers