Labor reallocation in the heat: A comprehensive analysis in rural Bangladesh

This paper examines the impact of extreme heat on the sectoral reallocation of working-age adult male labor in rural Bangladesh using a three-period panel on individual employment. It shows that high temperatures prompt a labor shift from the non-agricultural to agricultural sectors, primarily into agricultural wage jobs. Variations in employment choices in the agricultural sector depend on household land ownership. Individuals in households with more land tend to engage in crop cultivation, whereas individuals in households with little or no land are more likely to work for wages. Two key channels explain how extreme heat influences employment. First, extreme heat raises demand for hired agricultural labor, especially during busy farming seasons, as labor loss risks crop failure. Second, local demand effects become evident as higher temperatures reduce overall household income, raise food prices, and shift spending towards food, causing the non-agricultural sector to contract.