Essays on macro development

Abstract

This dissertation consists of three chapters, all of which are joint works with Mauricio Barbosa-Alves. The first chapter studies the impact of heat waves on international migration patterns. Using census data from Guatemala, we document novel evidence suggesting that areas affected by elevated temperatures exhibit less migration in the following year. We show that the magnitude is larger in rural areas. We postulate that in the short run, years with higher-than-usual temperatures reduce rural productivity, decreasing migration from credit-constrained workers who need to pay migration costs. In the second chapter, we take the results mentioned above and study the implications of climate change on migration. In our context, climate change's effects are two-sided. While declining rural productivity makes migration more appealing, it also makes it increasingly difficult to pay the migration cost. We build a dynamic incomplete-markets migration model with credit-constrained workers and migration costs where elevated temperatures affect rural productivity. We estimate the effect of elevated temperatures on crop yields and then estimate the model to match the temperature-migration link we document. We project rural productivity for different climate change scenarios. We show that migration slowly increases for all scenarios as low-income workers need to start saving to migrate. Additionally, we find that transfers providing insurance against elevated temperatures reduce migration under all scenarios. Counterintuitively, although the weather-contingent transfers help pay the migration cost, its insurance effect makes staying more appealing. The third chapter studies the effect of elevated temperatures on prices. Using exogenous variation from localized temperature fluctuations and a comprehensive consumer price panel for Brazil, we show that local relative food prices rise after exposure to high-temperature regions. This increase is marked in "non-tradables'' —fresh, hard-to-transport items not often traded internationally. We also find that regions with poorly integrated agricultural networks experience greater price surges, especially in these non-tradable goods. We show that these findings are robust and economically significant. We make sense of these patterns through the lens of an expanded trade model, capitalizing on the insights gleaned from the regression analyzes to deduce good-specific trade costs within the country. These trade costs prevent risk sharing between regions. A complete set of counterfactuals is yet to be developed, but we plan to assess (i) how heterogeneity in these trade costs causes dispersed welfare costs and (ii) given trade costs, the effects of climate change into risk-sharing and crop selection.