The economic impact of Sargassum: Evidence from the Mexican coast

This paper assesses the economic impact of pelagic Sargassum seaweed washed ashore in tourism-heavy coastal zones in the Mexican State of Quintana Roo. We use a geographic information systems (GIS) dataset of monthly observations from 2016 to 2019 for 157 beach segments. The dataset comprises an innovative measure of Sargassum seaweed presence, remotely sensed nighttime light intensity as a proxy of economic growth, as well as information on key infrastructure, sociodemographic and beach characteristics. We perform an event study by applying a fixed-effects regression model that controls for general time trends and unobserved, time-invariant differences across observations. We estimate that the presence of Sargassum in a beach segment reduces nighttime light intensity by 17.5 %, representing an approximate 11.6 % decrease in gross local product. Our analysis finds significant lagged effects up until 12 months after Sargassum was detected that range between 5.9 % and 9.9 %. The estimated impacts are consistently significant and negative across numerous specifications, including an adjusted measurement of Sargassum and the consideration of potential spatial correlation across beach segments. These results highlight the considerable negative impacts of Sargassum on coastal economies and the need for public and private interventions to heighten economic resilience in coastal communities. • We study the economic impact of Sargassum on coastal zones of Quintana Roo, Mexico. • Sargassum presence is measured monthly at the beach-level using remote sensing data. • Using nighttime light intensity, we estimate a reduction in gross domestic product of 11.6 %. • Lagged effects in the tourist sector can be observed even 12 months after detection. • Our estimations are robust to correcting for spatial correlation.