The Effects of Precipitation Shocks on Rural Labour Markets and Migration

The welfare of workers in rural areas is highly affected by agricultural output volatility, caused in part by weather shocks. A volatile source of income is an important factor in inducing migration. While the impact of rainfall shocks on migration is well studied, the channels through which these shocks affect migration are underexplored. In this paper we study the hypothesis that the labour market is an avenue that carries the effect of precipitation shocks on migration. This paper first establishes the effect of precipitation shocks on the labour market. We use individual-level data combined with station-based precipitation data of Iran at the rural-agglomeration level in a fixed-effects panel-data model to find that workers in agriculture and industry sectors decrease their hours of work in response to negative shocks. We then use a linear probability model to show that negative shocks almost double the probability of migration and labour-migration for young men in Iran. Estimations of this paper indicate that as unemployment rate in rural areas increases, migration out of those regions rises as well. Additionally, controlling for the local labour market conditions at origin captures the impact of shocks on migration, implying the labour market is a channel through which precipitation shocks affect migratory decisions.