Do temperature shocks affect non-agriculture wages in Brazil? Evidence from individual-level panel data

Abstract

Abstract The relationship between temperature and agriculture outcomes in Brazil has been widely explored, overlooking the fact that most of the country's labor force is employed in non-agriculture sectors. We use monthly individual-level panel data spanning the period from January 2015 to December 2016 to ask whether temperature shocks impact non-agriculture wages in formal labor markets. Our results show that additional days in a month that fall within high-temperature ranges have significant adverse effects on real wages. Assuming a uniform climate change scenario where the daily temperature distribution shifts by 2 $^{\circ }$ C, we calculate income losses for formal workers in non-agriculture markets equivalent to 0.12 per cent of 2015 GDP.