Climate change and development in South Africa: the impact of rising temperatures on economic productivity and labour availability

Abstract

Climate change has a major impact on productivity of different economic sectors as well as different labour groups. Here we study the crucial linkage between gradual climate change and availability of low-skilled labour in rural areas of South Africa. Using a nationally representative panel of micro-survey data, we derive marginal impacts of rising temperatures on labour availability. Our econometric findings suggest that optimal conditions maximizing weekly labour supply are heterogeneous across sectors. We develop an analytical model of overlapping generations to study the long-term impacts of future climate and socioeconomic changes on labour supply and welfare. Overall, high exposure of low-skilled labour to climate change and rising temperatures reduces the supply of low-skilled labour which in turn, reduces the wage gap between high-skilled and low-skilled labour. However, the overall impact of climate change on economy remains negative and the welfare in terms of output per adult drops by 20% compared to the baseline case with no climate change.