Evaluating the impact of a natural disaster on human capital and productivity: evidence from the 2024 Brazilian floods
Climate change has increased the occurrence and intensity of extreme weather events, putting the lives of billions of individuals at risk. In this context, accurate estimates of the cost of natural disasters are critical for our understanding of the impact of climate change. In particular, economic costs are usually underestimated by focusing on assets destroyed and not including the impact on human capital and productivity. The aim of my proposed work is to provide cost estimates of these previously ignored effects on human health capital, human capital accumulation, and productivity of workers and firms, using the 2024 floods in Rio Grande do Sul, Brazil, as a case study. To achieve this, I will use Brazilian administrative microdata and I will rely on two empirical strategies. First, I will use a difference-in-differences approach to compare outcomes for individuals/firms in areas within the state of Rio Grande do Sul that were affected or not by the floods, accounting for local characteristics constant using fixed effects. Second, I will apply an event-study design for individuals/ firms, allowing me to investigate the dynamic effects over time. The research will estimate the causal effect of floods on human capital and productivity, complementing standard cost estimates focused only on physical capital and direct human costs. This work will contribute to the economic literature on consequences of climate change, and increase our understanding of the effects of natural disasters. The project will develop implications of the research for other countries at risk of extreme weather events.