When the Rain Stops Falling. Effects of Droughts on the Tunisian Labour Market

Abstract We investigate the effects of severe drought shocks in Tunisia’s agricultural sector during the period 2000-2019. Using labour force surveys aligned with granular weather data, we calculate Standardized Potential Evapotranspiration Index (SPEI) to detect moderate-to-severe drought shocks occurred at the governorate level and frame the analysis in a staggered difference-in-differences setting with repeated negative events. We find that shocked areas experience a maximum of 7.4 to 10.6 percentage point drop in agricultural employment compared to the untreated or not-yet-treated governorates. We observe a contemporaneous opposite dynamic in the employment rate of low-skill and less climate-sensitive sectors, as well as a modest and transient increase in unemployment. The effects are largely heterogeneous across workers' groups, with women, young individuals and low-educated workers paying the highest toll. Urban non-agricultural workers are temporarily crowded out from the labour market due to the increase in the informal labour supply.