Adapting%20to%20Climate%20Change%3A%20Long%2DTerm%20Effects%20of%20Drought%20on%20Local%20Labor%20Markets%0D%0A

Working Papers

Adapting to Climate Change: Long-Term Effects of Drought on Local Labor Markets


CODE: IDB-WP-466
AUTHOR(s): Bastos, Paulo , Busso, Matías , Miller, Sebastian
PUBLISHED: December 2013
LANGUAGE: English
RELATED TOPICS: Poverty Reduction and Labor
DOWNLOAD FILE IN: English

Abstract:

We examine the long-term impacts of drought on local labor markets in Brazil. Us- ing rainfall data going back over a century, we build contemporaneous and historical drought indices for more than 3,000 local areas, and examine them in conjunction with five waves of population census data spanning 1970-2010. Results from a difference- in-differences design reveal that increased drought frequency in the previous decade reduces local value added, employment and wages in the agricultural sector; leads to job losses and pay cuts in the local manufacturing and services sectors; and induces out-migration, especially among younger cohorts, leading to relative population de- cline. These findings are in line with standard general-equilibrium theory featuring imperfect labor mobility across space.

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