Climate Change and Labor Reallocation: Evidence from Six Decades of the Indian Census

Maggie Liu, Yogita Shamdasani and Vis Taraz

American Economic Journal: Economic Policy, 2023, vol. 15, issue 2, 395-423

Abstract: How do rising temperatures affect long-term labor reallocation in developing economies? In this paper we examine how increases in temperature impact structural transformation and urbanization within Indian districts between 1951 and 2011. We find that rising temperatures are associated with lower shares of workers in nonagricultural sectors, with effects intensifying over a longer time frame. Supporting evidence suggests that local demand effects play an important role: declining agricultural productivity under higher temperatures reduces the demand for nonagricultural goods and services, which subsequently lowers nonagricultural labor demand. Our results illustrate that rising temperatures limit sectoral and rural-urban mobility for isolated households.

JEL-codes: J61 N35 O13 O15 O18 Q54 R23 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1257/pol.20210129

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