The Effects of Precipitation Shocks on Rural Labor Markets and Migration

Abstract

The welfare of workers in rural areas is highly affected by agricultural output volatility, caused in part by weather shocks. A volatile source of income is an important factor in inducing migration. While the impact of rainfall shocks on migration is well studied, the channels through which these shocks affect migration are underexplored. This paper hypothesizes that the labor market is an avenue that carries the effect of precipitation shocks on migration. This paper first establishes the effect of precipitation shocks on the labor market. We use individual-level panel-data combined with station-based precipitation data at the rural-agglomeration level in a fixed-effects panel-data model to find that workers in agriculture and industry sectors decrease their hours of work in response to negative shocks. We then use a linear probability model to show that negative shocks almost double the probability of migration and labor-migration for young men. Estimations of this paper indicate that migration is higher out of regions with a larger unemployment rate. Additionally, controlling for the local labor market conditions at origin captures the impact of shocks on migration, implying the labor market is a channel through which precipitation shocks affect migratory decisions.

Keywords: Precipitation shocks, rural labor markets, rural out-migration

JEL Classification: J21, J43, J61, O13, O15