Capital as an anchor of agricultural employment: Evidence from the 1975 frost

Bruno Barsanetti

Regional Science and Urban Economics, 2024, vol. 108, issue C

Abstract: How do temporary shocks affect the spatial distribution of employment in agriculture? I investigate this question by examining the 1975 frost that damaged coffee trees in Brazil. I find that the frost persistently affected the spatial distribution of employment in agriculture. To identify the effects of the capital destruction from the frost, I compare changes in agricultural employment across local economies that had different coffee tree densities right before the frost and that were differently affected by the extreme weather. The frost resulted in a persistent decline in agricultural employment. The findings are consistent with a history versus expectations model in which fixed and specific capital (such as coffee trees) prevents multiple equilibria despite strategic complementarities in crop choice.

Keywords: Path dependence; Capital destruction; History versus expectations (search for similar items in EconPapers)
JEL-codes: O12 R11 R12 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:108:y:2024:i:c:s0166046224000723

DOI: 10.1016/j.regsciurbeco.2024.104041

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