The environmental impacts of export booms in Brazil

Export booms can boost formal job growth and lead to greener employment. In Brazil, between 2000 and 2020, municipalities more exposed to exports showed higher employment growth. A 1% increase in exports led to a 0.4% increase in formal jobs three years later. While environmentally risky jobs tend to rise more rapidly in the short run, the expansion of sustainable employment is more persistent over time. The Brazilian experience demonstrates that export-led growth can be compatible with greener employment and formalization, provided that supportive policies are in place.

Brazil has experienced a dramatic increase in exports over the past two decades, with exports tripling since 1997 and peaking at USD 400 billion in 2010. This export boom, driven by agriculture, oil, and manufacturing, has been widely credited with boosting economic growth and job creation. However, there is a persistent concern—both within Brazil and internationally—that this export-led growth has come at the expense of the environment. The prevailing perception is that the expansion of export sectors, particularly those linked to natural resources, has led to increased environmental degradation and a rise in environmentally risky jobs.

To better understand the relationship between export growth, employment, and environmental outcomes, a recent paper sheds light into this by investigating the environmental impact of the exports boom through a labor market lens. It combines administrative, census, and customs data with a very detailed taxonomy of economic activities tailored to the Brazilian context to document how the environmental characteristics of the workforce changed over time and space in the 2000–2020 period.

Covering both formal and informal labor markets, the study finds that environmentally risky activities account for a large share of total employment in Brazil. In 2000, the median share of workers in these activities was 65% and declined to 50% in 2010. The first panel of the figure below the spatial distribution of the share of environmentally risky activities in total employment, while the second panel presents the same share for environmentally sustainable activities. As can be seen, there is a relative stability of environmentally sustainable activities in the workforce: the distribution across municipalities has not changed significantly over time, with an average increase of 1 percentage point between 2000 (19 percent) and 2010 (20 percent).

Our paper additionally shows that regions with higher exports exposure have experienced faster growth in formal employment compared to other regions. The figure below shows a protracted labor market adjustment after a positive foreign demand shock in Brazil. The elasticity of formal employment to exports was 0.25 on impact, peaked at around 0.4, and remained greater than 0.3 six years after the shock. This effect is long-lasting: ten years after the increase in exports, regions still experience a relative increase in formal employment and a relative decrease in informal employment, suggesting that export booms can also induce formalization in the long run.

The analysis also shows that the benefits of exports growth are evenly distributed across workers’ gender, with formal employment elasticities being higher for women than men. Additionally, highly skilled workers enjoy more significant and sustained wage and employment gains compared to low-skilled workers.

Regarding the environmental consequences of exports, the study concludes that the relationship between exports and the environment is nuanced. On impact, environmentally risky sectors initially respond more intensely to export shocks. However, over the medium run environmentally sustainable sectors demonstrate consistent growth, and the pattern reverses. In the long run, environmentally sustainable employment in regions more exposed to exports keeps growing, while environmentally risky employment is unaffected. This result challenges the perception that export growth primarily drives environmentally harmful industries.

The findings also reveal opportunities and challenges. Export growth has clearly driven formal job creation in Brazil in the 2000-2020 period, especially in sectors like agriculture, oil, and mining. Moreover, higher employment is found in environmentally risky and sustainable sectors, but the long-term benefits of persistent job growth tend to be in sustainable sectors.

How can Brazil ensure that the exports growth is consistently aligned with the principles of environmental sustainability? The paper suggests that targeted policies – such as investing in renewable energy, sustainable agriculture, and eco-friendly manufacturing – can help. By supporting labor formalization and encouraging greener industries, Brazil can make sure that the gains from exports growth are both widely shared and environmentally responsible.

The study contributes to the global debate on trade and the environment by providing empirical evidence that trade openness does not necessarily lead to environmental degradation. Instead, with the right policies, export growth can support both economic and environmental objectives. These findings are of wide interest to policymakers seeking to design trade and industrial policies that support both economic and environmental goals. The Brazilian experience demonstrates that export-led growth can be compatible with greener employment and formalization, provided that supportive policies are in place.