We study how extreme (high) temperatures affect firm dynamics—entry, exit, and (aggregate) productivity—in Chinese manufacturing sectors. Existing studies focus on the effects on incumbent firms (intensive margin), while we examine the effects on entry, exit (extensive margin), and their...

We study how air pollution affects firm dynamics: entry, exit, innovation, and (aggregate) productivity. Using an instrumental variable strategy, we find that air pollution significantly reduces entry and innovation and raises exit. Moreover, air pollution leaves firms with higher productivity...