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

Author

Listed:
  • Paulo Bastos

    ()

  • Matias Busso

    ()

  • Sebastian Miller

    ()

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.

Suggested Citation

  • Paulo Bastos & Matias Busso & Sebastian Miller, 2013. "Adapting to Climate Change: Long-Term Effects of Drought on Local Labor Markets," Research Department Publications IDB-WP-466, Inter-American Development Bank, Research Department.
  • Handle: RePEc:idb:wpaper:idb-wp-466
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    More about this item

    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • N96 - Economic History - - Regional and Urban History - - - Latin America; Caribbean
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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