On the effects of wildfires on poverty in Bolivia

This paper examines the impact of wildfire events on poverty and the labor market in Bolivia. To this end, we match data from NASA’s MODIS Collection-6 MCD64A1 burned area product with household surveys for the period 2005–2020. Similar neighboring municipalities are clustered using the max-p-region algorithm to achieve survey representativeness at granular geographical levels. The causal effects of wildfire events on poverty, household per capita income, and agricultural income are estimated using the Interactive Fixed Effects Counterfactual Estimator. We find a significant short-term increase in poverty following a wildfire event, explained by a temporary decline in household per capita income and agricultural labor income. This paper contributes to enhancing our understanding of how wildfires affect labor markets in developing economies. • Wildfires regularly affect Bolivia, where lack of insurance leads to welfare losses. • This is the first paper to assess the impact of wildfires on poverty in this country. • Wildfires lead to an 8% poverty rise after one year and 7.7% after two years. • The main mechanism driving the poverty increase is a reduction in agricultural income. • Findings highlight the need for targeted income policies for agricultural workers.