Impact of seasonal temperature rise on labour and capital productivity in manufacturing sector: a study with Canadian panel data

Abstract

Rising global temperature is one of the manifestations of climate change. This study analyses the impact of average temperature rise in summer and winter on production in the manufacturing sector, which is mostly indoor production. This study also compares the differential impact of temperature rise on indoor and outdoor production. Using panel data from ten Canadian provinces for the period of 1997 to 2010, it finds that the rise of average temperature in summer causes labour and capital productivity in manufacturing sector to decline. As a result the production of manufacturing goods falls, but this impact is much weaker compared to that on outdoor production, i.e., the production in agriculture, forestry, fishing, and hunting sectors together. Average temperature rise in winter, however, leaves production in the manufacturing sector unaffected. These results are obtained by controlling for population growth, GDP per capita, and yearly-dummies. These findings may have some policy implications for Canada and other countries that have been experiencing warmer than usual summer and winter temperatures due to climate change.