Temperature, Labor Reallocation, and Industrial Production: Evidence from India

To what degree can labor reallocation mitigate the economic consequences of weather-driven agricultural productivity shocks? I estimate that temperature-driven reductions in demand for India are associated with increases nonagricultural employment. This suggests ability sectors to absorb workers may play a key role attenuating shocks. Exploiting firm-level variation propensity workers, relative expansions manufacturing output more flexible markets. Estimates suggest that, absence reallocation, local losses could be up 69 percent higher. (JEL J23, J43, L60, O13, O14, Q54, Q56)