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Do temperature shocks affect non-agriculture wages in Brazil? Evidence from individual-level panel data

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Listed:
  • Jaqueline Oliveira
  • Bruno Palialol
  • Paula Pereda

Abstract

The relationship between temperature and agriculture outcomes in Brazil has been widely explored, overlooking that most of the country's labor force is employed in nonagriculture sectors. We use monthly individual-level panel data spanning January 2015 to December 2016 to ask whether temperature shocks impact non-agriculture wages in formal labor markets. Our results show that a 1oC shock increases wages where climate are colder, but reduces wages where climate are hotter. We calculate that wages fall 0.42% on average, an income loss equivalent to 0.06% of GDP annually. Assuming future temperatures rise uniformly by 2oC, and that no adaptation occurs, we expect annual income losses five times larger. The heterogeneous effects we find also suggest that weather vulnerability may deepen existing income inequalities.

Suggested Citation

  • Jaqueline Oliveira & Bruno Palialol & Paula Pereda, 2021. "Do temperature shocks affect non-agriculture wages in Brazil? Evidence from individual-level panel data," Working Papers, Department of Economics 2021_13, University of São Paulo (FEA-USP).
  • Handle: RePEc:spa:wpaper:2021wpecon13
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    References listed on IDEAS

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    2. Wei, Xiahai & Li, Jianan & Liu, Hongyou & Wan, Jiangtao, 2023. "Temperature and outdoor productivity: Evidence from professional soccer players," Journal of Asian Economics, Elsevier, vol. 87(C).

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    More about this item

    Keywords

    temperature shocks; labor productivity; nominal wage exibility; non-agriculture sector; formal labor markets;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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