Description: Labor-Public Economics Workshop: Guilherme DePaula (Iowa State University)
Location: 368A Heady Hall
Contact Person: John Winters
Title: Adapting to Disasters: Evidence from Drought in Brazil
Abstract: Can societies adapt to more frequent and intense weather disasters? We estimate the value and the limit of disaster adaptation in Northeast Brazil, a semi-arid region with a long history of droughts. The main contribution of this paper is the identification of the effects of drought frequency and reservoir construction on economic and population outcomes. We create a dataset that replicates the network of rivers and monitoring stations in Brazil and we use within state-biome variation in extreme river flow and river gradient to identify the impact of drought frequency and the adaptation value of reservoir placements. We find that the adaptation value of reservoirs is large but declines rapidly with drought frequency. Adding a reservoir offsets the impact of an increase in drought frequency on GDP per square kilometer by 27\% and on population density by 26\%. However, the contribution of a reservoir declines to zero at a frequency of 3 droughts per decade. Reservoirs expand subsistence agriculture, increasing vulnerability, but also accelerate rural-urban migration, improving resilience.