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CEP discussion paper

Temperature, labor reallocation and industrial production: evidence from India


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 flexible labor markets. Estimates suggest that, in the absence of labor reallocation, local economic losses could be up to 69% higher.


Jonathan Colmer

1 May 2018     Paper Number CEPDP1544

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This CEP discussion paper is published under the centre's Urban programme.