Essays on the impacts of climate change on income-generating activities in developing countries
Document TypePhD thesis
Access StatusThis item is embargoed and will be available on 2022-06-12.
© 2020 Farzana Hossain
Global climate change is expected to increase global mean surface temperature, precipitation variation, and lead to more frequent and intense natural disasters. The adverse consequences of these climatic events are likely to borne disproportionately by developing countries. This thesis quantifies the causal effects of changing climatic conditions in developing countries and identifies the channels through which the economy is affected. In Chapter 2, I examine the direct and indirect consequences of floods on manufacturing establishments. I construct a unique panel dataset of flood inundations in India using high-precision satellite images that I match with formal and informal sector establishment-level data. I document significant heterogeneity in vulnerability and resilience to floods within the formal manufacturing sector. The least-productive formal establishments shut down after floods but there is no labor reallocation to more productive establishments. Instead, I find evidence of labor reallocation to informal household-run microenterprises. Given that informal firms are far less productive than formal ones, this flood-induced reallocation will result in a reduction in aggregate productivity. Indeed, I find that a 10% increase in the incidence of flooding leads to a 17.3% reduction in aggregate productivity in the manufacturing sector. In Chapter 3, I explore how high temperatures affect the output and productivity of informal household-run microenterprises. I use detailed production data on informal manufacturing microenterprises in India and combine them with exogenous year-to-year variations in the annual distribution of daily temperatures. I show that an increase in the number of hot days significantly reduces output produced by informal microenterprises by reducing worker productivity and working hours. These negative effects are mainly on the worst-off enterprises that have low capital and electricity intensity. Using household-level data, I also that the negative impact of high temperatures on microenterprises leads to a reduction in the welfare of households working in the informal economy by reducing their consumption. These findings suggest that without adaptation measures, temperature-driven productivity shocks can undermine hard-fought poverty reduction in developing countries. In Chapter 4, we explore the spillover effects of extreme rainfall on the consumption expenditure of rural agricultural households in India. We exploit exogenous variation in rainfall variability in own-district and neighboring districts and combine those with household-level panel data. We show that while greater own-district rainfall raises rural household consumption, greater rainfall in neighboring districts has a negative effect on consumption. We document that these negative effects are mainly on rural agricultural households as the reduction in crop prices is the main channel for the spatial spillover effect of rainfall from neighboring districts. Thus, our findings suggest that climate change adaptation policies to protect farmers should also consider the spillover effect of greater rainfall.
KeywordsClimate Change, Natural Disasters, Environment and Development, Firms, Informal Economy
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- Economics - Theses