Research
The impact of wildfires on productivity
Abstract: In this paper, we investigate the causal effect of wildfires on firms' productivity. Balance sheet information of firms was matched with the geographical distribution of burnt areas in Portugal in 2017, using the 7-digit postal code of the firms. This enables us to differentiate treated firms, located in a burnt area in 2017, and a control group of firms in non-affected areas. We rely in a difference-in-differences strategy to find the average effect of the treatment on productivity levels of the firms, while trying to distinguish what are the channels through which productivity is affected, either through changes in investment or in the stock of intangible assets. The heterogeneous impacts of wildfires on firms, based on their asset structure, sector of activity, size, age, and export status, as well as the dynamic evolution of the effect on productivity, are also in the scope of this paper. The quantification of these heterogeneous impacts is essential to identify the most affected sectors of activity and to inform public policy responsible for developing ex-post measures that aim at supporting the affected firms.
The impact of wildfires on assets and employment (joint with Marta C. Lopes)
Abstract: This paper analyzes the impact of wildfires on firms’ assets and employment levels. We match the firms’ balance sheet information with detailed geographic distribution of the burnt areas in Portugal in 2017, using the 7-digit postal code of the firms. This allows us to distinguish treated firms, located in burnt areas, and a control group of firms in non-affected regions. Using a difference-in-differences approach, we find that treated firms have, on average, decreased their assets and employment levels and increased other expenses, that include losses in inventories, comparing to firms in non-burnt areas. Considering the heterogeneity in firms’ asset structure, we also find evidence that the negative effect on assets is amplified in firms with higher shares of land and buildings. Firms in the agricultural sector, most recent firms and smaller firms seem to be more vulnerable to this type of event. This analysis allows us to quantify the impacts of wildfires and its heterogeneous effects, which are relevant to inform public policy that design ex-post supporting measures for firms affected by wildfires.
Do droughts dry up the primary sector? Evidence from a quasi-natural experiment
Abstract: Climate models predict an increase in the frequency and severity of droughts in South Europe. This justifies the need to evaluate whether there is a causal effect of droughts episodes on economic activity, in order to properly design policies measures to tackle this issue. Using Portugal as a case study, this paper explores the regional disparities in terms of drought incidence, in order to analyze the impact of a drought on economic indicators of firms in the primary sector. Combining two rich datasets of drought incidence and of firm-level data, we distinguish between firms located in areas that experienced a drought in 2015 (treatment group) and otherwise (control group). The comparison of outcomes of interest, such as sales or number of workers, between the treatment and control group provides an estimate of the causal effect of a drought, using a difference-in-differences design technique (DiD). Our results suggest a negative impact on sales, number of workers and expenses in agricultural activities related to the growing of non-perennial crops. Greater vulnerability to the 2015 drought is presented by micro enterprises, non-exporting firms and more recent firms in this sector of activity. Heterogeneous effects suggest the implementation of tailored drought management policies based on the characteristics of the firms, to prevent major damages from drought or eventually compensate firms for occurred losses.