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

Hotter years have been routinely linked with reduced economic output in developing countries. New research shows that one reason is that people are less productive at work and more likely to be absent on hot days. The aggregate effects are large enough to significantly reduce the output of the manufacturing sector. By using several high-frequency microdata sets of worker output and a nationally representative dataset of more than 58,000 factories across India, researchers found that plants produce about 2% less revenue for every one-degree rise in annual temperature. This is reflected in lower Indian GDP output in hot years and possibly also lower year-on-year growth. Researchers estimated that the greatest declines occurred in labor-intensive plants.

E. Somanathan, Rohini Somanathan, Ananth Sudarshan & Meenu Tiwari