Young and small firms and resilience to extreme weather events

Abstract

In this paper, we demonstrate that the presence of entrepreneurial organizations, proxied by young and small firms, in an economy increases its resilience to external shocks. We estimate the effect of local young and small firm employment shares on employment growth through extreme weather events in US counties using an event study model. We find that higher employment shares of young and small firms reduce employment losses for given levels of property damages. We contribute to the literature by showing that entrepreneurship enhances economic resilience to physical climate shocks at the local level. As regional resilience can be considered a public good, our findings add an argument to the case for supporting young and small firms in the face of progressing climate change.