The Labor Market Effects of Droughts in MENA

This paper examines the impact of negative precipitation shocks (droughts) on labor markets in the Middle East and North Africa region. Using Labor Force Survey data across five countries over approximately 25 years and matched with fifth generation of atmospheric reanalysis produced by the European Centre for Medium-Range Weather Forecasts hourly climate data, the study finds that droughts affect labor market outcomes at both the extensive and intensive margins. A negative precipitation shock is associated with a 1 percentage point increase in unemployment and a 4.4 percent reduction in weekly hours worked for both men and women. The results are driven by urban areas, highlighting that the labor market effects of extreme weather events may extend beyond their impact on the agriculture sector and rural areas. However, extreme weather events do negatively affect a subset of the rural population-young women-by increasing unemployment. The findings provide crucial empirical evidence on the socioeconomic costs of climate variability, underscoring the need for targeted policies that address these impacts in urban settings