How climate change reallocates labour and capital within countries

The negative impact of climate change on local economic activity has been well studied. However, so far, we have lacked a clear understanding of how it affects the allocation of labour and capital. Christoph Albert, Paula Bustos, and Jacopo Ponticelli use new data on extreme weather events that occurred in Brazil during the last two decades and write that prolonged droughts cause the reallocation of capital and labour away from affected regions, effectively changing the structure of the economy in both directly affected areas and those integrated via labour and capital markets.