Assessing the impact of climate change on entrepreneurship: short-term and long-term effects

Climate change is one of the biggest crises facing humanity today, but the existing literature lacks discussion on the impact of climate change on economic development from the perspective of entrepreneurial activities. This study investigates the impact of climate change risks on entrepreneurship, distinguishing between short-term and long-term effects. Using data on firm dynamics, natural disasters, and financial institution presence, we find that climate-related disasters reduce firm entries and increase exits in the short term due to overreaction to immediate shocks. Long-term impacts involve increasing firm exits and decreasing firm survival rates. Areas with dense financial institutions show greater resilience, emphasizing the importance of financial infrastructure. Our findings highlight the importance of robust financial infrastructure in disaster-affected regions to support entrepreneurial resilience and economic stability.