Labor-Market Adjustment Under Extreme Heat Shocks: Evidence From Brazil

Abstract

Despite rich evidence on the contemporaneous labor-productivity impact of heat shocks, little is known about what happens to employment over time. This paper provides worker-level evidence on labor-market adjustment margins to extreme heat. Exploiting employer-employee matched data from Brazil, I find that quarterly heat shocks lead to increases in the propensity of manufacturing-worker layoff. I further combine agricultural census and crop calendars to identify the transmission mechanism. Second, consistent with the direct labor productivity channel, the impact is stronger for workers in routine-manual task intensive occupations. Third, tracking individuals across job spells, I provide evidence on heat-related worker reallocation failures.