Temperature, Labor Reallocation, and Industrial Production: Evidence from India
- American Economic Journal: Applied Economics (Forthcoming)
To what degree can labor reallocation mitigate the economic consequences of weather-driven
agricultural productivity shocks? I estimate that temperature-driven reductions in the demand
for agricultural labor in India are associated with increases in non-agricultural employment.
This suggests that the ability of non-agricultural sectors to absorb workers may play a key
role in attenuating the economic consequences of agricultural productivity shocks. Exploiting
firm-level variation in the propensity to absorb workers, I estimate relative expansions in manufacturing output in more
exible labor markets. Estimates suggest that, in the absence of
labor reallocation, local economic losses could be up to 69% higher.
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