Climate Change and Labour Allocation in Rural Mexico: Evidence from Annual Fluctuations in Weather

Abstract

This article evaluates the effects of annual fluctuations in weather on employment in rural Mexico to gain insight into the potential labour market implications of climate change. Using a 28‐year panel on individual employment, we find that years with a high occurrence of heat lead to a reduction in local employment, particularly for wage work and non‐farm labour. Extreme heat also increases migration domestically from rural to urban areas and internationally to the US. A medium emissions scenario implies that increases in extreme heat may decrease local employment by up to 1.4% and climate change may increase migration by 1.4%.