Abstract
<title>Abstract</title> <p>Objective This study examines how industrial structure and adaptive capacity mediate the impact of climate change on labour productivity. Through a comparative empirical analysis of OECD and ASEAN country blocs, it investigates the systematic heterogeneity in the temperature–productivity relationship, and it is critical for long-run growth projections and targeted adaptation policy. Design/Methods/Approach: The analysis utilizes an unbalanced annual panel (1990–2020/24) for 28 OECD and ASEAN countries. A dynamic Panel Autoregressive Distributed Lag (ARDL) / Pooled Mean Group framework is applied, integrating sectoral variables with macroeconomic controls. This method is chosen to robustly distinguish short-run climatic shocks from long-run equilibrium relationships while accommodating cross-country heterogeneity in adjustment dynamics. Findings: The analysis reveals a stark divergence in climate vulnerability between ASEAN and OECD economies, driven by industrial structure and adaptive capacity. For ASEAN, where the average temperature (26.1°C) already nears the identified productivity threshold of 26.6°C, even marginal warming triggers significant output losses, particularly in outdoor-intensive and manufacturing sectors. This renders a large portion of the workforce directly exposed to heat stress. In contrast, OECD economies, with their cooler average climates and greater prevalence of climate-controlled work environments, show no significant short-term productivity response to temperature changes. However, they face a latent long-term risk: sustained warming is projected to erode industrial and manufacturing productivity by 1.5% and 2.5% per 1°C increase, respectively, with manufacturing being exceptionally sensitive. Originality/Value: This study contributes to the literature by integrating sectoral exposure and adaptation metrics into a dynamic panel framework, thereby disentangling the mediating role of industrial structure in climate–productivity linkages. Its comparative analysis of OECD and ASEAN blocs provides novel macro-level evidence on how economic development shapes heterogeneous climate vulnerabilities, advancing empirical research beyond agriculture-specific or single-region studies. Practical/Policy implication: The findings necessitate a strategic shift from reactive climate mitigation to proactive, sector-specific adaptation integrated into core economic planning. For ASEAN economies, policy must prioritize investment in cooling infrastructure and heat-resilient urban design to prevent breaching identified productivity thresholds. OECD countries should focus on enhancing long-term resilience within critical, high-exposure sectors such as manufacturing. Both contexts require tailored adaptation strategies informed by granular, localized vulnerability assessments to ensure efficient resource allocation and safeguard long-term economic competitiveness.</p>