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Natural disasters and labor markets

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  • Kirchberger, Martina

Abstract

While it is clear that natural disasters have serious welfare consequences for affected populations, less is known about how local labor markets in low-income countries adjust to such large shocks. Combining data from the Indonesia Family Life Survey, the DesInventar database, the U.S. Geological Survey, and district-level employment indicators, this paper explores how a large earthquake in Indonesia affected labor market outcomes, in particular the evolution of wages across sectors. I find that the earthquake had a positive effect on wage growth for workers who were employed in the agricultural sector at baseline. I propose two mechanisms for this result: a higher growth rate of the price of rice and a downward shift in the supply of workers in the agricultural sector. I show that evidence mainly supports the latter: labor shifted out of the agricultural sector into the construction sector, raising the marginal product of labor in agriculture.

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  • Kirchberger, Martina, 2017. "Natural disasters and labor markets," Journal of Development Economics, Elsevier, vol. 125(C), pages 40-58.
    • Handle: RePEc:eee:deveco:v:125:y:2017:i:c:p:40-58
    DOI: 10.1016/j.jdeveco.2016.11.002
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    More about this item

    Keywords

    Local labor markets; Natural disasters; Aid; Reconstruction;
    All these keywords.

    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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