This is the eighth in our series of posts by PhD students on the job market this year.
The process of structural transformation - moving workers from low (agricultural) to high (non-agricultural) labor productivity sectors - is critical for economic growth. However, we know much less about the environmental impact of such sectoral reallocation of labor. In particular, labor exits from agriculture can have adverse environmental consequences if farmers respond to tighter labor supply and switch to labor-saving technologies with a potentially larger carbon footprint.
In my job market paper with co-authors Teevrat Garg and Maulik Jagnani, we focus on one specific environmental consequence of structural transformation: the increased use of fire as a labor-saving but polluting technology by farmers in India. Farmers use fire as a low-cost means of clearing crop-residue left after harvest, ease harvesting of sugarcane, and clear undergrowth on fallow lands in shifting agriculture. These agricultural fires are a growing environmental and public health concern in India, contributing to as much as half of the particulate pollution in many parts of the country during the winter months. We present the first evidence that agricultural labor exits compel farmers to use a labor-saving but polluting technology -- fire -- resulting in increased particulate matter.
Our empirical strategy leverages population threshold-based village eligibility rules in India's flagship rural road construction program - the Pradhan Mantri Gram Sadak Yojana (PMGSY). Using a regression discontinuity design, we show that rural roads raise annual incidents of agricultural fires by nearly 70% and a 1.3% increase in the overall concentration of particulate matter (PM 2.5) in newly connected villages. Heterogeneity by labor wage rates and cropping patterns at baseline suggests that the primary mechanism through which rural roads increase agricultural fires is by moving workers out of agriculture.
We combine administrative information on the rural road construction under the PMGSY with satellite-based agricultural fires and pollution measures at the village level. Starting from the early 2000s, the PMGSY aimed to provide all-weather road connectivity to previously unconnected villages. The program prioritized villages with a population above 1000, followed by villages over 500, and then villages under 500. To estimate rural roads' effect on agricultural fires and PM2.5, we employ a fuzzy regression discontinuity design (due to imperfect compliance of the PMGSY with the population threshold rules). Our first stage results show that, during 2008 -13, villages above the PMGSY population threshold see a 23-percentage point increase in the likelihood of receiving a road (Figure 1).
Impact on fires and air pollution
We measure annual fire activity using daily data from NASA satellites based on the detections of infrared radiation associated with biomass fires within a 10-kilometer radius around sample villages. Villages above the treatment threshold experience a sharp jump in the number of fires relative to villages below the population cut-off for road assignment (Figure 2). Our IV estimates, instrumenting access to rural roads with the PMGSY population threshold, suggest a local average treatment effect (LATE) of 2.6 additional fires per year (a 70% increase relative to the control group mean). This increase in agricultural fires also results in a corresponding decline in air quality. Using satellite and atmospheric model-based estimates of the annual average PM2.5, we observe a large and statistically significant increase in PM2.5 for villages at the population treatment threshold (Figure 2). The corresponding IV estimates show an increase of 1.3% (0.5
Is the increase in PM 2.5 driven by mechanisms other than agricultural fires? Rural roads can increase transportation, and the resulting vehicular emissions could plausibly lead to worsening air quality. We test for this possibility by examining the seasonal effect of roads on fires and pollution emissions. Our results show that the increase in fires and emissions is concentrated in the winter harvest and post-harvest months (October - March) and muted during the rest of the year. The winter months correspond to the period where farmers benefit from the use of fires in the face of agricultural labor exits - either to clear harvest (rice) residue off fields within a narrow time window before planting in the next season or to make (sugarcane) harvesting less labor-intensive. Moreover, we show that the increase in particulate matter is driven by emissions from biomass burning, with null effects on emissions from all other anthropogenic sources. Together, these results strongly suggest the overall impact on pollution is likely to be driven by agricultural fires rather than other channels such as vehicular emissions.
Is the increase in crop fires driven by agricultural labor exits? If agricultural labor exits were the primary driver for an increase in crop fires, one would expect to see effects concentrated in areas which see a larger the movement of workers out of agriculture and where the prevalence of rice or sugarcane – crops that benefit most from the use of fire in the face of agricultural labor exits – is greater. To test these hypotheses, we employ baseline data on relative farm wage rates and acreages by type of crops at the district level.
We find that rural roads' impact on the decline in the share of workers in agriculture is most pronounced in districts where the relative agricultural wage is lower (below median) at baseline, but not in districts where the relative agricultural wage is higher (above median). These results suggest that roads facilitate reallocation in districts where returns to labor reallocation are the highest. Correspondingly, we find that the increase in agricultural fires is concentrated in districts with lower relative agricultural wage rates. Second, as one would expect, rural roads' effect on agricultural fires is significantly larger in districts with a higher prevalence of rice or sugarcane. Finally, we combine heterogeneity in relative agricultural wage rates and rice or sugarcane production and find that the increase in agricultural fires and particulate emissions is concentrated in districts with a higher rice or sugarcane production and where the relative agricultural wage is lower at baseline.
Our work builds on important literature examining trade-offs and synergies between economic development and environmental quality. In particular, our findings complement recent work suggesting that increases in rural wages due to India's large public works program prompted farmers to switch to mechanized harvesting technologies that leave more crop residue, thereby increasing agricultural fires. We fail to find evidence that rural roads increase the local stock of or household use of hired mechanized agricultural equipment such as tractors, combine harvesters, or threshers. Instead, our results suggest rural roads induced movement of workers out of agriculture and increased use of crop fires – a labor-saving technology.
Implications for policy
The persistence of a labor productivity gap across agriculture and non-agricultural sectors has generated considerable interest amongst governments and international agencies to devise policies that reduce frictions in labor reallocation across sectors. Our research underscores the need to complement these policies with strategies to mitigate their potential adverse environmental externalities. In our context, future research could investigate the design and implementation of monetary and non-monetary incentives to alter farmers' decisions to engage in using fire in agriculture in the face of soaring labor costs.
Hemant Pullabhotla is a postdoctoral fellow at Stanford University. More details on his research can be found on his webpage.