The Effects of Natural Disasters on the Labour Market: Do Hurricanes Increase Informality?

Abstract

work is licensed under a Creative Commons IGO 3.0 AttributionNonCommercial-NoDerivatives (CC-IGO BY-NC-ND 3.0 IGO) license (http://creativecommons.org/licenses/by-nc-nd/3.0/igo/ legalcode) and may be reproduced with attribution to the IDB and for any non-commercial purpose, as provided below. No derivative work is allowed.Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license.Following a peer review process, and with previous written consent by the Inter-American Development Bank (IDB), a revised version of this work may also be reproduced in any academic journal, including those indexed by the American Economic Association's EconLit, provided that the IDB is credited and that the author(s) receive no income from the publication. Therefore, the restriction to receive income from such publication shall only extend to the publication's author(s). With regard to such restriction, in case of any inconsistency between the Creative Commons IGO 3.0 Attribution-NonCommercial-NoDerivatives license and these statements, the latter shall prevail.Note that link provided above includes additional terms and conditions of the license.The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent.http://www.iadb.org 2017 Abstract* This paper studies the probability of formally employed men falling into informality because of exposure to hurricanes and tropical storms. It combines destruction variables calculated from historical storms' physical characteristics at the district level with 36 quarterly rounds of labour force surveys in Jamaica. The empirical strategy exploits variation arising from the storms' timing, intensity, and geographic locations within a panel random-effects endogenous choice model framework. Controlling for potential biases due to initial conditions, panel attrition, and employment selection, findings suggest that hurricanes do not affect unemployment and positively affect the transition to informality probability regardless of whether the individual was initially employed in a formal or an informal job. When the marginal effects of the storm were studied, the probability of becoming informally employed ranges between 8.5 and 14.5 percent depending on the employee's initial state and the moment when the storms were suffered. The effect is mainly driven by the impact of hurricanes on the service sector. These results suggest that the public and private policy agenda on adaptation to climate change should incorporate a discussion on how to off-set the negative effects of hurricanes, since these events could become worse in the near future.JE...

The impact of tropical storms on tax revenue

“…As a matter of fact, Auffret (2003) show for the Caribbean a substantial decline in the growth of investment after natural disasters. Additionally, Pecha Garz'on (2017) studied hurricanes in Jamaica and provided evidence that storms positively affected the probability of formally employed men falling into informality by between 8.5% and 14.5%.…”

The Analysis of Natural Disaster Risk Impact on Labor Market Outcomes: Does It Lead to Middle-Class Workers Decrease?

“…A study conducted by Garzón (2017) explains the impact of a tornado disaster on unemployment and the tendency for workers to transition to the informal sector. The findings indicate that, overall, the incidence of natural disasters does not significantly impact unemployment.…”

Disasters and the diminishing of women's economic empowerment

“…Furthermore, disasters can lower the wages that women receive in all sectors of the economy, as evidenced by the flooding in Bangladesh in 1998 (Mueller and Quisumbing, 2011). Although men are also likely to transition from formal to informal labour after a hurricane or other type of disaster, they earn higher wages than the women involved in the informal labour market (Garzón, 2017). Lastly, in the wake of disasters, women are less likely to be able to take advantage of work opportunities, as job recovery tends to be focused on construction, a male‐dominated industry (Venn, 2012).…”