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Natural disasters and labor markets

Martina Kirchberger

Journal of Development Economics, 2017, vol. 125, issue C, 40-58

Abstract: While it is clear that natural disasters have serious welfare consequences for affected populations, less is known about how local labor markets in low-income countries adjust to such large shocks. Combining data from the Indonesia Family Life Survey, the DesInventar database, the U.S. Geological Survey, and district-level employment indicators, this paper explores how a large earthquake in Indonesia affected labor market outcomes, in particular the evolution of wages across sectors. I find that the earthquake had a positive effect on wage growth for workers who were employed in the agricultural sector at baseline. I propose two mechanisms for this result: a higher growth rate of the price of rice and a downward shift in the supply of workers in the agricultural sector. I show that evidence mainly supports the latter: labor shifted out of the agricultural sector into the construction sector, raising the marginal product of labor in agriculture.

Keywords: Local labor markets; Natural disasters; Aid; Reconstruction (search for similar items in EconPapers)
JEL-codes: J20 Q54 O10 (search for similar items in EconPapers)
Date: 2017
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