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Labor market adjustment to extreme heat shocks: Evidence from Brazil

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  • Xie, Victoria Wenxin

Abstract

Despite ample evidence on the labor productivity impact of heat shocks, little is known about how heat shocks affect labor adjustment over time. This paper uses administrative employer–employee linked data from Brazil to examine margins of labor market adjustment to extreme heat. Tracking workers over time and across job spells, I find that quarterly heat shocks increase the probability of formal manufacturing layoffs. In the medium run, there is limited intersectoral and interregional reallocation, as well as a significant failure rate to reallocate back to formal sectors, indicating job transitional costs. Finally, the employment impact of heat shocks is larger for workers in more routine manual task intensive, less abstract occupations.

Suggested Citation

  • Xie, Victoria Wenxin, 2024. "Labor market adjustment to extreme heat shocks: Evidence from Brazil," Journal of Economic Behavior & Organization, Elsevier, vol. 222(C), pages 266-283.
    • Handle: RePEc:eee:jeborg:v:222:y:2024:i:c:p:266-283
    DOI: 10.1016/j.jebo.2024.04.017
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    More about this item

    Keywords

    Labor market adjustment; Transitional costs; Extreme weather;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • F18 - International Economics - - Trade - - - Trade and Environment
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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