VoxEU Column Climate Change Productivity and Innovation The pace of temperature increase has been steadily accelerating over the past decades (IPCC 2021), with the summer of 2024 being the hottest on record (Copernicus 2024). The increasing frequency and intensity of heat stress episodes due to climate change pose significant threats to the global economy through various channels (Aguilar-Gomez 2024, Ponticelli et al. 2023, Cascarano and Natoli 2023), including through its effect on labour productivity. As temperatures increase, both the cognitive and physical capacity of workers decrease, and extreme temperatures can also increase absenteeism due to heightened health issues and transport disruptions. Beyond its direct effect, heat stress can further impact productive activity through disturbances to production infrastructure, increased production costs, or disruptions to supply. While a significant body of literature examines these losses at the macro-level, most micro-level evidence consists of case studies or country-specific analyses. Despite stronger climate mitigation efforts, temperatures are expected to continue to rise, intensifying these economic challenges and reinforcing the need to understand them. Against this backdrop, our new paper (Costa et al. 2024) presents novel cross-country firm-level evidence on the effect of heat stress. The analysis builds on a dataset of detailed weather and financial information for more than 2.7 million manufacturing and services firms across 23 advanced economies between 2000 and 2021, complemented with country-level information on adaptation investment. We introduce two measures of heat stress: an absolute measure counting days where maximum temperatures fit in specific bands, and a relative measure tracking heatwaves, defined as consecutive days above a local historical temperature threshold. While the former allows us to track the impacts of slow-onset changes, the latter provides insights into the effects of extreme weather events. How do extreme temperatures affect firm productivity? Our analysis finds that both more frequent high-temperature […]