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Essays in Environmental Economics and International Trade

  • Author(s): Xie, Wenxin
  • Advisor(s): Carson, Richard;
  • Hanson, Gordon
  • et al.

The first two chapters of this dissertation seek to understand how climate change affects labor market outcomes and manufacturing firms in developing country contexts. Chapter One provides worker-level evidence in Brazil on different labor market adjustment margins with respect to extreme heat shocks and the underlying transmission mechanism. Exploiting rich employer-employee matched data, I find that quarterly heat shocks lead to significant increases in the propensity of manufacturing-worker layoff through the direct labor productivity channel. A significant proportion of manufacturing workers who experienced heat-related layoffs fail to find any formal employment within 36 months. These results show that heat shocks lead to persistent negative employment effect in the formal manufacturing labor market due to failure in job transitions over the medium run.

In Chapter Two, I turn the focus to manufacturing firms in Indonesia. In a heterogeneous firm model with capital-biased productivity, I incorporate temperature shocks through the direct labor productivity channel and illustrate how

less productive firms decide on production and re-optimize factor intensity as temperature increases. Empirically, I match gridded daily weather data with the Indonesian firm-level industrial surveys. I find that under heat shocks, the initially less productive firms are more likely to exit, highlighting the presence of survival bias intrinsic to firm-level intensive margin analysis. Second, on the aggregate, resources reallocate from less to more productive firms within industries. Among surviving firms, we observe factor substitution from unskilled to skilled workers, and firms switching from using domestic to foreign intermediate inputs.

Chapter Three investigates how global commodity price booms affect land use and forest management, and the factors that influence sustainable environmental practices of mining firms. We employ a spatial and temporal lens, by collecting proprietary data on more than 30,000 mines located around the world and matching the location of these mines to high-resolution satellite imagery. This allows a granular study of the relationship between commodity prices and loss of forest cover worldwide, as well as the spatial distribution of global mines in relation to changes in land-use patterns and local economic activities as measured by nighttime luminosity. We find a positive elasticity of forest cover loss. Mine owners from rich countries display larger disparity in the elasticity of forest cover loss when operating in low versus high income countries. Our estimates suggest that the early 2000s "commodity super-cycle" contributes to roughly 8%-20% of the observed total deforestation around mining sites and that mining-induced deforestation is not limited to the immediate surroundings of mining pits.

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