Climate Change and Labor Allocation in Rural Mexico: Evidence from Annual Fluctuations in Weather (7/14/16)

A forthcoming paper in the Economic Journal, by Katrina Jessoe, Dale Manning, and J. Edward Taylor evaluates the effects of annual fluctuations in weather on employment in rural Mexico to gain insight into the potential labor market implications of climate change.

Using a 28-year panel on individual employment, we find that years with a high occurrence of heat lead to a reduction in local employment, particularly for wage work and non-farm labor. Extreme heat also increases migration domestically from rural to urban areas and internationally to the U.S. Using two leading climate models, we find that under a medium emissions scenario, increases in extreme heat decrease local employment by up to 1.4% and climate change may increase migration by 1.4%. Our results indicate that climate change will have an economically significant impact on rural labor markets in less developed countries. Extreme temperatures will affect local earnings opportunities negatively. Poor wage-laborer households will be most vulnerable to these shocks, as their local employment opportunities are most sensitive to extreme heat.