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POID Working Paper

Disaster management

Climate change is making natural disasters more frequent, yet little is known about the capacity of firms to withstand such disasters and adapt to their increased frequency. We examine this issue using the latest wave of the World Management Survey (WMS) that includes new questions on firms' climate change perceptions and adaptation behaviour. Combining this with geocoded data on natural disasters and previous WMS waves, we create a panel spanning 8,000 firms across 33 countries and three decades that shows exposure to disasters decreases growth inputs, outputs and firm survival. More importantly, firms with structured management practices are more resilient, suffering much smaller drops in jobs and capital. To understand the mechanisms behind this resilience, we use the new WMS climate questions to show better managed firms have more accurate perceptions of climate-related risks to their businesses. Such firms are also more likely to have implemented measures to adapt to climate change both overall and in response to their perceived climate risk. Other aspects of firm organisation, such as decentralisation, also help protect against disasters, but their adaptation behaviour is not well-targeted. These results show that improving management is one way to help protect economies from climate change shocks.

JEL classification: Q54, M11, L25, H12

Agnes Norris-Keiller and John Van Reenen

7 June 2024     Paper Number POIDWP095

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