When the Rain Stops Falling. Effects of Droughts on the Tunisian Labour Market

Abstract

Abstract We investigate the effects of severe drought shocks in Tunisia’s agricultural sector during the period 2000-2019. Using labour force surveys aligned with granular weather data, we calculate Standardized Potential Evapotranspiration Index (SPEI) to detect moderate-to-severe drought shocks occurred at the governorate level and frame the analysis in a staggered difference-in-differences setting with repeated negative events. We find that shocked areas experience a maximum of 7.4 to 10.6 percentage point drop in agricultural employment compared to the untreated or not-yet-treated governorates. We observe a contemporaneous opposite dynamic in the employment rate of low-skill and less climate-sensitive sectors, as well as a modest and transient increase in unemployment. The effects are largely heterogeneous across workers' groups, with women, young individuals and low-educated workers paying the highest toll. Urban non-agricultural workers are temporarily crowded out from the labour market due to the increase in the informal labour supply.