Productivity, Growth, and Welfare

earn greater returns on their human capital investments. Workers with lower skill levels stay in their home region in times of plenty, where they can earn agricultural incomes as farmers.

Rainfall variation directly affects farmers’ incomes, and negative shocks can be particularly stressful for the least-wealthy households with poor access to infrastructure (such as irrigation), insurance (through credit markets and formal markets), or alternative income sources (such as a local manufacturing sector to work in). As shown in chapter 2, workers most vulnerable to the productivity impact of rainfall variation are likely to move in response to adverse climate shocks, provided they can bear the cost of moving. These workers also tend to have lower levels of human capital and their movement in response to adverse income shocks induced by climate conditions is associated with lower-skill migration. Additional evidence from India corroborates this, finding that climate migrants are selected from the lower end of the skill distribution and from households strongly dependent on agriculture (Sedova and Kalkuhl 2020)

In most cases, such workers will move to cities within their home country, where they are more likely to find nonagricultural employment opportunities, often working (and even living) in the informal sector. But such migration can also occur across borders. Evidence suggests that droughts in Mexico are associated with increased migration to locations in the United States where strong migrant networks exist. Nevertheless, more educated individuals are less likely to engage in such migration, possibly because they have better local diversification opportunities (Hunter, Murray, and Riosmena 2013).

The implications of drought-induced migration for the productivity of cities and the larger economy are ostensibly different from other kinds of migration. Estimates from the data described in box 3.1 suggest that a reduction in rainfall from the 75th to the 25th percentile of this sample (that is, equivalent to the interquartile range) would imply 3.4 percent lower earnings for these migrants, reflecting lower productivity of the low-skilled migrants in the labor markets to which they move.1 The lower productivity of migrants escaping dry conditions may have negative effects on the growth of per capita incomes in their host regions. City growth driven by such migration may not necessarily be conducive to further economic growth, and drought-induced migration may in fact be one of the factors leading to the phenomenon of urbanization without growth that has been documented by researchers (Fay and Opal 1999; Gollin, Jedwab, and Vollrath 2016). Evidence from Indonesia, for instance, shows that rainfall-induced internal migration tends to reduce employment and wages of low-skilled native workers in the host region (Kleemans and Magruder 2018).

Also, lower-skilled migrants are more likely to live in informal housing with poorer access to amenities (Niu, Sun, and Zheng 2021). Seasonal migrants often live in slums or are hosted by extended family networks. Their presence can be perceived by natives as adding stress on local amenities, public resources, and employment opportunities in their host regions, which in developing countries are often already struggling to provide for locals. In addition, the stress on local amenities may reduce property values in neighborhoods that house low-skilled immigrants, and such reduction can persist for decades as a result of the vicious cycle of low-skilled migration that is triggered because of the poorer amenities. For instance, evidence from Ambrus, Field, and Gonzalez (2020) suggests that the sorting of lower-skilled workers into cholera-affected neighborhoods in the aftermath of the 1854 Broad Street outbreak in London resulted in 15 percent lower property values 10 years later, and the differences persisted for up to 160 years to the present day. Perceptions of such impacts, although not necessarily always true, are often a source of animosity toward migrant populations (Card, Dustmann, and Preston 2012; Tabellini 2020).

Despite the potential adverse consequences for productivity and inequality in the host regions, it is difficult to make broader claims regarding how the migration of low-skilled workers induced by dry shocks affects broader welfare. At a macro level, mobility restrictions are a source of significant losses in overall national productivity (Tombe and Zhu 2019). In the absence of the choice to migrate, the families of such migrants may have been pushed below subsistence levels in their agricultural homes. The households sending migrants to cities in times of low rainfall rely on their remittances to pay for their needs in the absence of sufficient agricultural incomes (Lucas and Stark 1985; Black, Arnell, and Dercon 2011).

Arguably, the suffering averted in the home regions by the decision to migrate could be deemed worth the costs to productivity in the host region. For example, evidence from the experience during the Dust Bowl in the United States suggests that migrants escaping drought-hit regions had lower levels of education, but workers’ ability to move out of rural areas limited the overall impact of the environmental collapse on the average wages of workers (Hornbeck 2020). In addition, evidence suggests that in the large cities a certain supply of unskilled workers is necessary to meet the labor demand created by the presence of the higherskilled workers, for example to do jobs in the restaurant and construction industries within a city (Eeckhout, Pinheiro, and Schmidheiny 2014). Thus, the flow of skilled workers has the potential to be either a bane or a boon, depending on circumstances, and welfare claims are difficult to make without careful consideration of the context in question and its intricacies.