When the rains fail: Climate shocks and firm productivity in Ethiopia

Working paper 11 Jun 2026 Firms, Trade and Sustainable Growth

Climate change is increasing the frequency and severity of extreme weather events, with drought posing significant challenges for firms in Least Developed Countries, particularly in Africa, by raising production costs and affecting productivity. This study addresses a gap in the literature by examining how drought influences total factor productivity in non-agricultural firms in sub-Saharan Africa, as well as the mechanisms through which these effects occur and the strategies firms use to adapt.