``Drought Shocks, Household Risk Sharing and Occupation Choices" Job Market Paper
Household labor reallocation provides a potentially important channel for rural households to adapt to changing weather patterns. Exploiting the temporal and spatial variation of drought occurrence in India, I find that drought reduces the share of agriculture labor hours by 3% or 110 hours. This reduction is driven by households that do not own land. Motivated by these facts, I develop and estimate a model of labor allocation across the agriculture and non-agriculture sectors to analyze how droughts may affect structural transformation. My results imply that projected increases in the frequency of droughts over the next 30 years will induce landowning households to allocate 2% more labor to agriculture and it will induce landless households to reduce their agricultural labor. The net effect is a 1% to 2% reduction in agricultural labor, which is small in percentage terms but large in levels as it implies 2.5 to 5 million individuals would leave agriculture. I also use the model to analyze how projected climate change would affect the cost to the government of achieving its stated target of increasing the manufacturing share of GDP to 25%. To achieve this target by 2035 in the absence of climate change, the government would have to subsidize non-agriculture wages by 28% with respect to 2011 non-agriculture wages. Under current climate change projections, the subsidy would need to be 73% larger.
"Drought Shocks and Structural Transformation in India"
Droughts are becoming increasingly common in India. However, most agricultural land remains rainfall dependent. Agriculture employs 50% of India's workforce who remain vulnerable to rainfall fluctuations. This paper studies the adaptation to droughts of rural households dependent on agriculture. Using a difference-in-difference estimation strategy across drought and non-drought affected regions, I test the effect of drought on annual agricultural labor hours of rural households. Findings suggest that rural households experiencing drought reduce 4.1% of their fraction of agricultural hours. There is a compositional income shift: the fraction of agricultural income falls and the fraction of non-agricultural income rises with no significant impact on total household income. Results suggest that drought causes households to adapt by diversifying away from agriculture, thereby accelerating the structural change in India. Interestingly, however attachment to agriculture in the form of land ownership mitigates the role of drought on diversification away from agriculture. Cultural obligations and land market transaction costs influence occupational choices in rural India.
Work in Progress
``Airport Expansion, Air Pollution, and Death Count in Mexico City." with Luis A. Fernández Intriago