Climate effects on the diversification strategy of export firms: Evidence from China

show an inverted U-shaped relationship between temperature and both newly added and exist- ing product categories. The results suggest that extreme temperatures reduce the product diversification of firms’ exports by reducing the variety of both newly added and existing prod- ucts. Looking at the marginal effects, temperature bins have a more pronounced negative effect on newly added product categories than on existing ones. The addition of new products, which indicates positive development and expansion, is hindered by unfavorable tempera- tures, which poses a challenge to the long-term sustainable growth of firms. In addition, a dynamic decomposition of changes in the number of product categories exported by firms can be expressed in the following formula: DDiversityi;t ¼ X pNewip;t X pExitipt ð14Þ Where Exitipt equals 1 if the product p belongs to an exit category, otherwise it is 0. Exit cat- egory refers to products that were present in the previous year but are absent in the current year. The remaining variables are consistent with the above context. Eq (14) shows that the change in the number of product categories this year is equal to the number of new product categories minus the number of exiting product categories. This dynamic change in product exits, as indicated by Eq (14), influences the second-order changes in the number of product categories exported by firms. In this section, we examine the impact of temperature on product exits in firms’ exports using two different approaches.

We use Eq (11) to regress the influence of temperature on the number of product categories that firms exit from the export market, represented by the blue dots in Fig 4. These dots repre- sent the impact of the temperature bins on the exiting product categories. In particular, tem- peratures above the optimal range tend to increase the number of product categories exiting Fig 4. Temperature and dynamics of firm exported products. Solid circles indicate the effect of temperature on newly added product categories, while triangles indicate its effect on existing product categories. The shaded area includes the 90% confidence interval. https://doi.org/10.1371/journal.pone.0308391.g004 PLOS ONE Climate effects on the diversification strategy of export firms PLOS ONE | https://doi.org/10.1371/journal.pone.0308391 August 16, 2024 20 / 28