Essays on international economics

Abstract

This dissertation comprises three interconnected chapters, each co-authored with Braulio Britos. The first chapter provides an extensive literature review that sets the stage and informs the analyses in the subsequent chapters. We synthesize existing research on the economic implications of climate change, with a focus on adaptation strategies that involve migration and trade. The following chapters share common features, including the role of adaptation strategies, the frictions that hinder such adaptation, and how we utilize short-run variations in weather to recover estimates of the severity of these frictions. We then use these estimated frictions to estimate the effects of new long-term productivity distributions, both over time and across space, on variables of interest. In Chapter 2, we investigate the influence of climate change on patterns of international migration, utilizing census data from Guatemala. We uncover novel empirical evidence indicating that regions experiencing higher temperatures see a decrease in migration during the subsequent year, with this effect being particularly pronounced in rural areas. We propose that elevated temperatures temporarily diminish rural productivity, consequently reducing the capacity of credit-constrained workers to afford migration costs. Thus, climate change exerts dual pressures: while diminished rural productivity potentially enhances the incentive to migrate, it simultaneously restricts individuals' financial capacity to do so. We develop and estimate a dynamic, incomplete-markets migration model featuring credit constraints and explicit migration costs, where increased temperatures negatively impact agricultural productivity. By calibrating our model to replicate the empirical temperature-migration relationship, we project future rural productivity under various climate scenarios. Our findings indicate a gradual increase in migration rates across all scenarios as workers preemptively save to afford migration, reflecting a substantial degree of anticipation. Additionally, we demonstrate that weather-contingent financial transfers, though potentially assisting in covering migration expenses, paradoxically reduce migration by providing insurance against temperature-induced income losses, thus making staying in affected areas relatively more attractive. In Chapter 3, we analyze the impacts of climate change on food prices across regions and income groups, looking into Brazilian data. As climate change alters comparative advantages in food production across goods and over space, existing trade frictions impede effective adaptation through sourcing adjustments, compelling reliance on local sourcing, and thereby pushing up food prices. Low-income households are relatively more exposed to food price fluctuations, as they tend to have higher food expenditure shares. We construct a spatial trade model that incorporates income heterogeneity and two distinct categories of food goods, characterized by varying degrees of costs associated with transportation and trade. This approach enables us to break down welfare losses attributable to climate change into specific contributions from food expenditure shares, trade shares, and productivity shifts. Leveraging Brazilian data, we estimate intranational trade relationships by observing responses to short-term weather variability, price fluctuations, and driving times between locations. Our empirical results indicate that trade costs for fresh foods are twice as sensitive to driving time as those for commodity goods, which incur relatively lower trade costs. Counterfactual analyses based on projected productivity changes reveal notable welfare losses, as well as substantial heterogeneity. The most exposed households would be willing to compromise approximately 3\% of their income to prevent anticipated productivity deterioration. Finally, we argue that investments aimed at enhancing road infrastructure emerge as an effective mitigation strategy, as they decrease trade costs, and promote integration. Households in certain states would be willing to pay up to 0.8% of their income to achieve a 10% improvement in average driving speeds nationwide.