Publications

2016
The Effect of Extreme Hydro-Meteorological Events on Labor Market Outcomes: Evidence from the Caribbean. 2016.Abstract

How do urban households adapt to climate change in developing countries where perfect insurance is absent and communal insurance is lacking given the collective exposure to the same shock?

I match individual labor market information from adults and children from a sample of 800 thousand individuals during the period of 2001-2010 with NASA’s daily rainfall data at the municipal level during the same period.  This data is rich in both temporal and spatial dimension, allowing for fine-grained analysis of how extreme precipitation events impacted individuals’ labor supply decisions and income in urban populations in the developing world.  This project focuses its attention on labor supply in the developing world – the primary source of household income throughout the world. Also, household allocation of adult and child labor in response to precipitation represents an avenue for exploring potential adaptations that may minimize or worsen the welfare effects from climate change. My econometric results indicate that the welfare impacts of extreme weather are statistically significant, economically meaningful and heterogeneous across genders and members of the family. Firstly, the probability of unemployment due to living in a municipality that experienced at least one flood increases by 6.2 percentage points net of observable determinants of productivity and outside options, as well as for municipality, month and year fixed effects.  This effect is twice as large for women (7 pp) than for men (4 pp).  The marginal effect of one additional extreme hydro-climatic event on labor supply and labor income is negative in the short term, and the effect of a negative hydro-climatic event is larger for labor income than hours worked. This has an important implication for welfare: to smooth income, individuals need to work more hours at a lower rate after extreme weather. Hours worked and labor income fully recover after 13 months of one extreme rainfall event. Families cope with tighter labor markets and falling labor incomes using a set of alternatives. First, adult individuals try to smooth shocks by becoming “forced entrepreneurs”, but men are more successful than women at finding income through this source: self-employment rises 7 percentage points for men and 2 percentage points for adult women. Finally, minors aged 12-17 enter the labor force. My statistical analysis shows that children’s labor force participation jumps 1.4 percentage points for boys and 4.7 percentage points for girls in response to floods. 

labormarkets10dec2015.pdf
2015
What do We Know About the Effectiveness of Ex-Ante Risk Management Strategies in Latin America and the Caribbean?. 2015. exanteriskmanagementlac.pdf
Climate, Conflict and Labor Markets. 2015.Abstract

This research aims at linking two strands of the literature: the recent works on climate and conflict (Burke, Hsiang and Miguel, 2015) and the economics of labor coercion (Acemoglu & Wolitzky, 2011, Dippel, Greif and Trefler, 2015). In the first area of knowledge, my research addresses an important knowledge gap on the role that institutional quality plays to help explain the directions and magnitudes of the impact of weather fluctuations on conflict through their effect on economic outcomes.  Regarding the second knowledge area, my research contributes to the creation of new knowledge by bringing rich individual data and the use of satellite-generated information to the analysis of coerced labor. Also, by analyzing the current phenomenon of coca planting and exploitation by non-State armed actors, my research can inform illegal drug policy as well as rural development policies.

 

More precisely, this research aims at understanding the causal effect of weather-induced agricultural shocks on confrontations and forced displacement in the context of the Colombian civil conflict. I first match monthly municipal rainfall to coca leaf yield, to show that rainfall is a strong predictor of coca yield. Standard economic theory predicts that the rising productivity should translate into larger wages. However, when I estimate the effect of the positive productivity shock on rural unemployment and wages in coca areas, I find that the increasing production due to good weather rises labor demand but labor income remains constant.

 

To estimate the effect of the positive productivity shock to coca-suitable areas on labor demand and wages, I estimate OLS equations of (log) wages and the probability of unemployment on individual characteristics that determine labor market outcomes and rainfall, controlling for municipality fixed-effects that absorb time-invariant characteristics, whether observed or unobserved, disentangling the precipitation shock from other sources of omitted variable bias, month*year fixed effects during the period January 2004-June 2010 and a department-specific linear time trend. Coca-suitable municipalities are those where coca has been cultivated in the municipality during at least one year during the period 1999-2010. These estimates are explicitly reduced form, and they focus on the effect of the variation in precipitation in coca-suitable areas on labor market outcomes. Given that precipitation varies plausibly randomly over time, as random draws from the municipality climate distribution, this approach has strong identification properties (Dell, Jones and Olken, 2014).

 

To explain the unexpected result of unchanged rural wages in response to increasing productivity, I draw on labor coercion models, where the role of coercion is to decrease the outside option of the coca farmers (Acemoglu & Wolitzky, 2011, Dippel, Greif and Trefler, 2015). These models hypothesize that an increase in coca productivity should be associated with expansion efforts by the coercive non-State armed groups and a decrease in forced displacement. Forced displacement occurs when farmers are able to leave the coca farming contract. Because the coerced sector yields higher returns with better rainfall, I first test that excess rainfall causes differentially lower forced displacement in coca suitable areas than in non-suitable areas. The results confirm, that in fact, an additional milimeter of precipitation above the municipality mean decreases forced displacement by 1.22% in coca-suitable areas; by contrast in non-coca areas the effect of positive rainfall shocks is approximately ten times smaller and insignificant.

 

A second way to test for coercion in coca suitable labor markets is to test whether high productivity months witness lower forced displacement. I therefore match coca leaf yield data with local violence in a small sample of municipalities with rich harvest data. I employ an Instrumental Variables estimation where changes in forced displacement are explained by coca leaf yield variations, and I instrument changes in coca leaf yield with rainfall. One additional arroba of coca leaf per hectare harvested is associated with a reduction of forced displacement of 4 people on average, and this estimate is significant at the 5 percent level.

 

Finally, I regress coercion efforts measured by confrontations between non-State actors who profit with cocaine and government forces as well as mayor killings on coca yield, instrumented with rainfall. As suggested by the labor coercion models, the IV estimates of the effect of positive productivity shocks on violence in coca areas are statistically significant and economically important, suggesting that the effect of weather shocks on labor markets is mediated by the quality of the institutions where these markets are embedded.

mariacacevedopaper21april2015.pdf
Inside the War on Drugs:Effectiveness and Unintended Consequences of a Large Illicit Crops Eradication Program in Colombia. 2015.Abstract

This article reports the results of an econometric evaluation of the effects of Plan Colombia, the largest US aid package ever received by a country in the western hemisphere. We assess how the aerial spraying of illegal crops affects both the size of the land cultivated with coca bushes as well as the dynamics of localized violence in the context of Colombia’s armed conflict. In particular, we show that the marginal effect of spraying one acre of coca reduces the cultivated area by about 11 percent of an acre. Since aerial spraying may shift coca crops to neighboring municipalities, this result should be interpreted as an upper bound, or at best local effect. To study the impact on conflict dynamics, we examine both the short-term and the long-term effects of crop spraying. Our results suggest that guerrilla-led violence increases both in the short and the long term. We interpret this result as evidence that the guerrilla tries to hold on violently
to the control of an asset that is of first order importance for their survival.

plancol_april_15.pdf
2013
Second Nature Geography and Regional IncomeDisparities in Colombia. El Trimestre Economico. 2013;LXXX (4) (320) :869-901. Publisher's VersionAbstract

This paper sheds new light on the observed income polarization process between Bogota and the rest of the departments in Colombia by pointing out the crucial role played by market access in avoiding departmental income disparities to be narrowed and, in so acting, as a penalty for the convergence process in income levels. Results from our econometric estimations with data for Colombian departments in the period 1975-2000 show that market access emerges as a key variable in explaining the spatial distribution of income in Colombia.