How firms in the developing world adapt to changes in weather extremes will play a key role in determining their nation's economic growth. This survey of the recent microeconomics adaptation literature suggests that although firm competitiveness is negatively affected by weather events, firms may bounce back better under certain conditions. The adaptation and resilience of firms to climate change depend on their capabilities, the available information on risks, and the depth of insurance and financial markets. As real-time weather forecasting improves, firms are better informed about these risks and this affects their decisions regarding their location, production, and configuration of supply chains. A firm's resilience also depends on the quality of public investment in infrastructure and the social safety net. Understanding that market frictions can slow the pace of adaptation, the paper concludes with some insights on the options available to policy makers.
Authors
- DOI
- https://dx.doi.org/10.1596/1813-9450-10797
- Disclosure Date
- 2024/06/10
- Disclosure Status
- Disclosed
- Doc Name
- Firm Adaptation to Climate Risk in the Developing World
- Product Line
- Advisory Services & Analytics
- Published in
- United States of America
- Rel Proj ID
- 1W-Climate Compatible Firm Growth -- P178397
- Sector
- Other Industry, Trade and Services
- Series Name
- Policy Research working paper ; no. WPS 10797; PLANET;
- TF No/Name
- TF0B7526-Climate compatible firm growth
- Theme
- Data production, accessibility and use,Entrepreneurship,Data Development and Capacity Building,Economic Policy,Green Growth,Economic Growth and Planning,Environment and Natural Resource Management,Enterprise Development,Private Sector Development,Public Sector Management,Climate change,Business Enabling Environment
- Unit Owning
- EFI-FCI-TIC-Investment Climate (ETIIC),IFC
- Version Type
- Final
- Volume No
- 1
Table of Contents
- Introduction 4
- Adaptive Capacity in the Perfect Foresight Benchmark Case 6
- Sectoral and Structural Dimensions of Adaptation 7
- Locational Choice as an Adaptation Response 10
- Adaptation to Sharp Climate Shocks versus Gradual Changes 13
- Climate Change Induced Uncertainty 15
- Adapting to the "Known" Risks of Climate Change 15
- Adapting to the Uncertainty of Extreme Rare Events 17
- Firm and Industry Attributes in Adapting to Risk and Uncertainty 18
- The Strategic Interactions between Firm Investment and Government Policy 19
- Government Infrastructure Investment 19
- Policies to Prepare for and Respond to Climate Change 20
- Empirical Benchmarking of Firm Adaptation Progress 22
- Conclusion 24
