Abstract

We study the impact of climate change on the labor share. Combining newly constructed US county-industry-level labor shares with climate variables, we find that extreme temperatures reduce the labor share, with stronger effects in industries with higher climate exposure and automation potential. Extreme temperatures also accelerate robot adoption. A back-of-the-envelope calculation suggests that the within-county-industry response to climate change accounts for 15% of the decline in labor share since 2000. Over the 20th century, however, the opposing effects of decreased cold days and increased hot days offset each other, consistent with the historical stability of labor share.