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

33 Pages Posted: 7 Jan 2014

See all articles by Paulo Bastos

Paulo Bastos

World Bank - Research Department; World Bank - Development Research Group (DECRG)

Matias Busso

Inter-American Development Bank (IDB)

Sebastian Miller

Inter-American Development Bank (IDB)

Date Written: December 2013

Abstract

We examine the long-term impacts of drought on local labor markets in Brazil. Using 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 decline. These findings are in line with standard general-equilibrium theory featuring imperfect labor mobility across space.

JEL Classification: J61, N96, O15, Q54, R11, R23

Suggested Citation

Bastos, Paulo and Busso, Matias and Miller, Sebastian, Adapting to Climate Change: Long-Term Effects of Drought on Local Labor Markets (December 2013). IDB Working Paper No. IDB-WP-466. Available at SSRN: https://ssrn.com/abstract=2375590 or http://dx.doi.org/10.2139/ssrn.2375590

Paulo Bastos (Contact Author)

World Bank - Research Department ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Matias Busso

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

Sebastian Miller

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

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